Clampdown on the Bursa's Wheels

Malaysia Boleh is now at work in the Bursa. Full speed!

While the political masters provided new macro policies to lift up the gloom of the recession, hoping to bring in a rush of fresh new FDI and to prop up the sagging capital market,Bursa Malaysia has gone the other way around, as if,subterfuging these efforts.

Bursa Malaysia's continuous clamping down on speculative trading in recent weeks has dampened trading interest,nullifying what great hopes the government has in mind in further opening up the economy and the market through these fresh policy initiatives.

Securities houses, subjected to intense scrutiny from regulators in recent weeks, has reported lower market volume all round.

Prime Minister Najib wide-ranging reforms this week, including cutting the Bumiputera listing requirements and drastically trimming the role of the Foreign Investment Committee (FIC) has not effectively up the tempo of trading.

As usual,traders blamed the clampdown and global recession for the softer market.

The daily market volume has been hovering between a low of just over RM800 million and just above RM1 billion a day this week.

"They have been calling and asking for names of people who trade in speculative stock so brokers have pulled back the margins on speculators, causing speculative stocks to drop," one broker said yesterday.

The recent retreat in the global stock markets as well as the impending introduction of a new index for Bursa is also causing some uncertainty in Bursa Malaysia.

"The global market looks a bit weak and we were hoping for more support from local institutions," says OSK Research chief Chris Eng.

Local institutions however feel they can get better returns from the Singapore and Hong Kong markets and are focusing there instead of the Bursa.

Foreign funds are also staying away from Malaysia due to better valuations in Singapore and Indonesia.

"There is no core attraction to Malaysia," said the head of research of one foreign fund. "Companies in Singapore and Indonesia are more global in scale but offer cheaper valuations. Even if there is a rebound, Bursa tends to be a laggard."

Fund managers are also adopting a "wait and see" attitude to the new FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) which will replace the current benchmark KLCI on Monday.

"Not many people know what to expect and they are not subscribed to the FBM KLCI. So fund managers will wait and see what happens," said one broker.

The cost of subscribing to the FBM KLCI is also putting off some fund managers who feel it is prohibitive.

OSK's clients are benchmarking their fund performance against the FBM 100 which they feel more closely matches the KLCI in addition to having a better spread of sectors and not wanting to give too much weightage to the stocks in the FBM KLCI.

Eng feels investors should get ready to sell and focus on defensive stocks.

"Be ready to take profit," he said. "Since global markets are in retreat, we should be in retreat as well."

From the above "wait and see" attitude to the new index,preference for trading overseas and an on-going messy witch-hunt for share speculators,do not expect the Bursa to go anywhere soon.