Bursa targeting individual investors

MALAYSIA'S bourse said it's seeking to woo individual investors who have shunned the market a decade after the Asian financial crisis.

Bursa Malaysia Bhd (1818) is working with brokerages and banks to "to reach out to retail investors in various towns and cities" to open up accounts and encourage online trading, chief executive officer Datuk Yusli Mohamed Yusoff said in an interview in Kuala Lumpur.

Trading by individuals fell to as low as 20 per cent of trading value from more than half before the start of the Asian financial crisis in 1997, when the benchmark index slumped by a record 52 per cent.

"A lot of retailers lost a substantial amount," Yusli said on Tuesday. The result is that the market is now "dominated by the local institutions," he said.
Most individual savings started shifting to mutual funds and unit trusts since Malaysia's economy went into a recession in 1998, Yusli said. They haven't returned to stock trading even as the economy expanded at an annual average of 5 per cent over the past decade and the benchmark index more than doubled.

The FTSE Bursa Malaysia KLCI Index has climbed 1.4 per cent so far this year, paring a gain of as much as 5.8 per cent amid concern austerity measures in Europe will reduce demand for the Malaysia's technology and commodity exports.

The exchange aims to boost the share of trading by individual investors "closer to a third," tapping Southeast Asia's second-highest savings rate, Yusli said, declining to give a target date. Malaysians saved 38 per cent of gross national income in 2008, lagging behind only Singapore's 47 per cent, according to data compiled by the World Bank and Bank Negara Malaysia..

The KLCI's 45 per cent gain last year lagged behind Southeast Asian neighbours even after the government announced stimulus plans totalling RM67 billion to help pull Southeast Asia's third-largest economy out of a recession.

Trading slumped by half to an average US$375 million (US$1 = RM3.33) a day over the six months ended May from the same period 13 years ago, right before the start of the regional financial crisis in July 1997, according to data compiled by Bloomberg. Neighbouring Singapore's figures have quadrupled to US$1.1 billion over that time, data from the city-state's exchange show.

"People's risk appetite is not there anymore, not like those days," said Lye Thim Loong, who helps manage US$500 million at Avenue Invest Bhd in Kuala Lumpur. "Those who traded recklessly with no fundamental reasons got burnt."

The slump in trading by individuals coincided with an exodus by foreigners from Southeast Asia's second-biggest stock market, leaving Bursa more reliant on domestic institutional funds. Overseas investors have sold a net RM1.36 billion of Malaysia's equities this year, adding to RM8.57 billion withdrawn in 2009 and RM38.6 billion that flowed out in 2008, according to exchange data. In 2007, they bought a net RM24.7 billion.

The exit left foreigners holding 20.6 per cent of local stocks at the end of April, down from 27.5 per cent in April 2007, according to stock exchange data. Overseas investors held 9.33 per cent of Tenaga Nasional Bhd at the end of April, compared with 27 per cent in April 2007, according to data from Malaysia's biggest power producer.

The state-controlled Employees Provident Fund accounts for 50 per cent of daily trading volume in the equity and bond markets, Prime Minister Datuk Seri Najib Razak said on March 30. More than half of the RM417.1 billion of market value in the benchmark stock index is owned by government-linked funds, according to calculations by Bloomberg.

Retail investors' share of trading is low by comparison with at least one neighbour, Thailand, where individuals accounted for 56 per cent of turnover so far this year, according to data compiled by Bloomberg. Exchanges in neighbouring Indonesia and Singapore don't track the figures.

"There has been some increase in the total of retail account sign-ups recently, but the amount is negligible," Alex Hwang, chief executive officer of HwangDBS Investment Bank Bhd in Kuala Lumpur, said in an e-mailed reply to questions. - Bloomberg