Abdullah Badawi, acting Prime Minister and acting Finance Minister of Malaysia announced on Tuesday 10 new measures aimed at bolstering the country's financial markets in the face of persistent underperformance.
"Uncertainties that have characterized the global and regional market environment over the past few months have had an impact on our market," Badawi told a press conference in Kuala Lumpur. "These measures are aimed at ensuring the continued growth of the economy and an efficient resilient and competitive capital market."
The ten new measures are:
- Stamp duty on all securities trading on the KLSE will be capped at RM200 per transaction, effective March 17th, 2003.
- Board lot sizes for securities traded on the KLSE will be standardized at 100 units by June. All IPOs from April will be based on 100 lot board sizes.
- The government is reviewing commission rates for brokers and expects to announce a minimum commission rate within a month.
- IPO processing times will be reduced to three months from the six-eight month current timeframe.
- New listings of companies with a RM250 million market cap and RM8 million profit for the previous financial year will be exempted from three to five year profit record requirement.
- The government is looking to merge government-linked companies in similar sectors.
- From March 12th, promoters can trade their shareholdings one year after an IPO or reverse takeover, down from four years.
- The Securities Commission (SC) will takeover the approval process from the Foreign Investment Committee (FIC) in cases where both SC and FIC approval is needed.
- Performance related pay and share option schemes will be established by government-linked companies.
- The SC and KLSE are establishing new training programmes for graduates and Bumiputeras.
Many of these measures make sense. The aim is clearly to increase market liquidity, remove market irrationalities and increase the purview of the Securities Commission, thus improving market regulation. In addition the move to merge government-linked companies could create some new heavy weight counters on the exchange.
The one apparently anti-liberal move is the imposition of minimum brokerage commissions. This goes against free market principles. But the move copies similar minimum rates which have been imposed in other Asian countries, namely Thailand and the Philippines. In both cases, while it has put some dent in trading levels, it has also ensured the survival of relatively strong local brokers, which in turn have kept the market liquid. It has been a move that has been counter-intuitively successful.
Yet despite all the good intentions, it is unlikely that these measures will have much effect in the short term. The Malaysian stock market has suffered along with the rest of the world at the feet of George Bush's warmongering. Reductions in stamp duty - while nice - are not exactly going to remove that menace from the market.
Still, the move comes barely two months after the government announced the creation of the RM10 billion ValueCap Fund that is investing in Malaysian stocks the government thinks are undervalued. That move has been widely criticized as little more than market manipulation. And while the latest moves look like being market liberal, anything the Malaysian government tries to do to boost its market, will always have its fair share of critics.
Those critics were probably the same ones who lambasted the government's 'go it alone' plan during the Asian financial crisis. But the policy of eschewing IMF advice and imposing currency controls has clearly been a success for the Malaysian economy. Perhaps over time these new measures might become equally as successful for the stock market as the non-IMF plan was for the economy as a whole.
