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KUALA LUMPUR: Bursa Malaysia Bhd has been consistent in enforcement and does not “pick and choose” in taking action against companies that breach listing requirements (LR).
Selvarany Rasiah
Chief legal officer Selvarany Rasiah said the exchange had a stringent LR framework and would take the necessary action after thorough investigation on companies alleged to have breached those requirements.
“If there is a delay (in announcing financial statements), lack of accuracy and misleading (financial) statements, we have taken action. Bursa has been very consistent,” she said after a briefing to announce the nationwide roadshow on Updates On Listing Requirements – Issues and Challenges yesterday.
The roadshow is jointly organised with the Malaysian Institute of Chartered Secretaries and Administrators (Maicsa).
Selvarany also said Bursa had constantly monitored local and foreign developments in stock markets to gauge the changing demands of these marketplaces.
“We have a very established mechanism in place and will only make changes where necessary for the maintenance of a fair and orderly market,” she said.
To a question how Bursa tackled issues such as accounting irregularities involving Transmile Group Bhd, she said Bursa had a strict framework and deadlines for companies to disclose financial statements.
“If the company can’t comply with these deadlines, it must apply for extension,” she said, adding that applications for extensions were strictly scrutinised and given only in situations that were beyond a company’s control, such as natural disasters.
On the roadshow, Maicsa vice-president Zainal Abidin Pit said the event would start today here, followed by five seminars in major towns in the country, ending in Penang on Aug 27.
He said the collaboration with Bursa allowed its members to gain a better understanding of the LR and enhanced disclosure practices among public-listed companies.
The roadshow, which is also open to the public, is expected to attract about 1,000 participants.
It will cover other aspects of corporate governance such as investor relations and corporate social responsibility.
Bursa can initiate special audit on any firm
By Presenna Nambiar presenna@nstp.com.my
June 20 2007
BURSA Malaysia Securities Bhd can call for a special audit on Transmile Bhd above and beyond any audit done.
"Bursa can call an audit at anytime, even after the audit that is being done is concluded," Bursa Malaysia chief regulatory officer Devanesan Evanson told reporters after a briefing in Kuala Lumpur yesterday.
He said Bursa Malaysia has powers to call for an independent audit on any company that it feels demands it, and has not exercised it in the Transmile Bhd case because it feels that the company's board has acted responsibly so far.
He said Bursa Malaysia will wait for the annual audited accounts to come out before taking appropriate action.
"We must let the dust settle before we take action, and not contribute to it," Devanesan said, adding that the penalties imposed will depend on the number of breaches recorded.
"The breaches will be presented to the listing committee, they will look at the facts of the case, circumstances and also have in mind the precedence, and then they will make a decision," he said.
The listing committee is independent of the management of Bursa Malaysia, and comprises of some directors from Bursa Malaysia and a majority would be industry representatives.
"The penalties that are to be taken is actually not determined by management, so to that extent there is adequate due process that is accorded to the company," Bursa Malaysia chief legal officer Selvarany Rasiah added.
Transmile must file its annual audited accounts by August 1 or risk being suspended from the stock exchange.
If accounts are still not filed three months later, Bursa Malaysia can de-list the company from the bourse.
17 takeovers and 16 new listings on local exchange this year
KUALA LUMPUR: Bursa Malaysia Bhd has recorded 17 takeover exercises and 16 new listings since the start of this year.
Chief legal officer Selvarany Rasiah said the market capital for takeover exercises, excluding takeover offers with the intention to preserve listing status, was RM46.29bil while the market capital for new listings was RM3.74bil.
Maxis was our biggest (takeover exercise) at RM39.9bil market capital, she said during a media briefing on Bursa's regulatory framework yesterday.
Selvarany also said Bursa had embarked on a marketing strategy to attract foreign companies for listings.
We have standardisation, cost effectiveness, (market) liquidity and investors' pull. We have all (the advantages) to bring in foreign listings, she said.
Chief regulatory officer Devanesan Evanson said that from January to April, there were 24 cases involving company directors and principal officers who were penalised through public reprimand plus fine.
He said in another 15 cases, those involved were given either warnings or reminder letters. Bernama
JAKARTA: Bursa Malaysia Bhd and Bursa Berjangka Jakarta signed a memorandum of understanding on Monday to establish cooperative ties in the development of futures and commodities markets in Malaysia and Indonesia.
The exchanges agreed to jointly develop areas of cooperation, facilitate information exchange and experiences in promoting the futures markets of both countries, Bursa said in a statement.
Bursa Malaysia is a global marketplace and, with the unprecedented and growing demand in Asia, we are proud of an alliance with such a reputable exchange, Bursa chief executive officer Datuk Yusli Mohamed Yusoff said.
Bursa Berjangka chief executive officer Hasan Zein Mahmud said both bourses operated derivatives market in palm oil in their respective countries.
Therefore, they had common aims and aspirations, he said.
This collaboration will allow both exchanges to gain through mutual efficiencies, he added.
Transmile shares extend fall, SC vows swift action
By Chong Pooi Koon pooikoon@nstp.com.my
June 21 2007
TRANSMILE Group Bhd's shares tumbled further on the stock market yesterday after the company filed police reports over an accounting scandal and its chief executive quit.
Both the Securities Commission (SC) and Bursa Malaysia also vowed to take "swift and appropriate" action against those responsible to restore investor confidence in the market.
"Investigations are ongoing and we will try to complete as soon as possible. Appropriate actions will be taken at the end of the investigation," SC chairman Datuk Zarinah Anwar told reporters at a capital market conference in Kuala Lumpur yesterday.
Transmile was among the top losers on Bursa Malaysia yesterday.
Its stock fell another 81 sen, or 14.1 per cent, to RM4.94 on active trade after its founder and chief executive officer Gan Boon Aun "voluntarily resigned" on Tuesday as the scandal took new turns at the air cargo operator.
"The SC will take swift and firm enforcement actions against the perpetrators. Our response to these developments is very clear," Zarinah said, pointing to a recent spate of accounting irregularities and suspected fraud cases that have surfaced, including Megan Media Holdings Bhd and Transmile.
Zarinah said the SC had in the past taken action against company directors, auditors, corporate advisers and management who had abused the market.
"There's a range of enforcement powers available to the SC and I will be very clear - we will use all these powers and leave no stone unturned in our investigative and enforcement efforts to come down hard on anyone who abuses our market," she added.
Another market regulator, Bursa Malaysia Bhd, has also pledged to take action against those who breached its listing rules once the investigation on Transmile is over.
However, chief executive officer Yusli Mohamed Yusoff admitted that Bursa Malaysia's power to penalise wrongdoers was limited.
"Bursa can impose some penalty, but it's fairly restricted and it can't go beyond RM1 million (per breach). However, other regulators like the SC will have different powers and those at fault are subject to the SC's action too," Yusli said.
He believes Transmile's was just an isolated case that boiled down to the management's integrity, and did not point to a systemic problem in Malaysian companies.
Both Yusli and Zarinah stressed that the country's existing legal, regulatory and corporate governance framework was robust and sufficient to protect the market.
"(Cases like this) could happen anywhere in the world, including the most developed and highly-regulated markets," Zarinah said.
"What is important is that when it happens, we are ready to investigate swiftly and appropriate action is taken," she added.
She said that apart from the regulator, other players, including the professionals and the industry governing bodies like the Malaysian Institute of Accountants (MIA), need to play their roles to maintain a well-functioning market.
"The industry bodies need to ensure that the complaints and grievances are properly investigated and actions appropriately taken," she said.
It was reported that the SC had in the past few years referred many cases to the MIA over the conduct of accountants and auditors, but so far no obvious action has been taken by the body.
KUALA LUMPUR: Cases like Transmile Group Bhd and Megan Media Holdings Bhd are not unusual but what is more important is to take action swiftly when they occur, said Securities Commission chairman Datuk Zarinah Anwar.
It happens in the most highly regulated, developed markets, even in the US.
We will do whatever is necessary in the course of our investigation, she said after her speech at the regional capital markets conference yesterday.
Investigations on the two companies' irregularities would be completed as soon as possible, she added.
Bursa Malaysia chief executive officer Datuk Yusli Mohd Yusoff said the Transmile case was unexpected, given that it was a significant stock with a huge following of investors.
We do not expect this kind of issue arising from our listed companies. Hopefully, were nearing the end of what needs to be disclosed by Transmile.
Were waiting for the company to announce the audited accounts. If there is a huge difference, we will take the necessary action, he said.
Yusli said Bursa could impose penalties on wrongdoers but these penalties were limited to RM1mil.
Nonetheless, it was possible that the offender would receive double whammy from Bursa and the Securities Commission, he added.
While the check and balance is in place, the first line of defence should be the management.
If the management does its job with true integrity, we shouldnt see this kind of issue in the marketplace.
The management has a huge responsibility towards public shareholders, he said, adding that, however, the two cases were isolated ones.
Zarinah said the market should not depend solely on the regulators to exercise regulatory discipline.
It was important for all market players to play their role and exercise the highest degree of due diligence and professionalism to ensure that such fraud cases were minimised, if not eliminated, she said.
The directors and management must be ethical and moral. They must create value, not destroy value, she said.
She added that the audit committee, on the other hand, must look at the financial management of the company.
Yusli said investors also played a role by being familiar with the profile of the management.
Besides looking at the business model, investors should also be comfortable with the people running the company, he added.
Zarinah noted that Malaysia had a robust legal regulatory framework on corporate governance that was internationally benchmarked and acknowledged.
A lot of our local practices here are being emulated in other emerging markets and we have a leadership role to play in the regulatory framework of these markets, she added.
Directors and management must create value, not destroy value DATUK ZARINAH ANWAR
BURSA Malaysia's benchmark index, the Kuala Lumpur Composite Index (KLCI), will be known as FTSE Bursa Malaysia KLCI from July 6 as the local bourse adopts the FTSE global index standard to ensure that it remains globally relevant.
The FTSE Bursa Malaysia KLCI will comprise only the largest 30 main board companies based on investable market capitalisation, instead of the current 100.
Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said the new index will be calculated faster, or every 15 seconds from 60 seconds now.
In a media briefing in Kuala Lumpur yesterday, he said the index will be calculated by FTSE according to transparent, publicly available rules and overseen by a committee of independent market practitioners who will review the index twice a year in June and December.
The index value will remain unchanged and will adopt the KLCI index closing value on Friday, July 3. Exchange- traded products now tracking the KLCI and FTSE Bursa Malaysia Large 30 Index will also move into the FTSE Bursa Malaysia KLCI.
"The migration of KLCI to the global standards of FTSE will provide a boost to our market's perception among investors, both local and foreign," said Yusli.
He added that the 30 constituents that will make up the index will be primary market movers that will more accurately define market activity.
FTSE Asia Pacific managing director Paul Hoff said he does not expect any significant disruption to the value of the index on July 6 as the FTSE methodology in developing index design and calculation is very transparent.
Neither does he expect any major selldown of stocks prior to the adoption, based on the experience of the Singapore stock exchange when it adopted the FTSE index standards.
"Of course there will be some selling but it will probably be relatively small," said Hoff.
Meanwhile, Yusli said the names of the 30 stocks will only be made known in July but "it is safe to assume that it will comprise the current 30 big companies".
Hoff added that based on the review made by FTSE, most likely one or two stocks will be removed from the list after each review.
He noted that Bursa Malaysia has made significant developments converting to a transparent, free-float adjusted and liquidity-screened single benchmark index.
"It should further benefit from more issuance of index-linked products such as exchange traded funds, derivatives, funds and other index-linked products," said Hoff.
KUALA LUMPUR: Bursa Malaysia Bhd sees little trading disruption over its plan to trim down the KL Composite Index (KLCI) to 30 large and liquid stocks. The new primary index, called the FTSE Bursa Malaysia KLCI, will replace the existing one effective July 6.
The new market benchmark will adopt the outgoing KLCI closing value on July 3. This will ensure the KLCI price continuity since it was first introduced in 1986.
Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said based on the exchange’s consultation with the industry, most index tracking fund managers were already focused on 25 to 30 counters that made up the KLCI.
“There would probably be some portfolio realigment by fund managers, but overall we see a smooth transition in the broader market,’’ he told a press conference yesterday.
FTSE Group Asia Pacific managing director Paul Hoff said based on the index company’s experience when introducing a new index elsewhere, there “would be some selling on affected stocks,’’ as index tracker funds adjusted their portfolio but the overall impact on the stock market was “minimal.”
The 30 constituents of the soon-to-be introduced FTSE Bursa Malaysia KLCI will be ranked primarily on share capital free float and will be similar to the existing FTSE Bursa Malaysia Large 30 index (FBM30).
It was observed yesterday that the top three companies on the KLCI were Sime Darby Bhd, Tenaga Nasional Bhd and Malayan Banking Bhd, while the top three companies ranked by free float were Public Bank Bhd, Sime Darby and Bumiputra-Commerce Holdings Bhd.
The top 30 companies represent 64% of the total market value, compared with 74% for the existing 100-strong KLCI.
Yusli said the six-month notice would provide adequate time for market players to make the necessary changes for the transition.
The new index nature of giving higher weightage to companies with higher number of shares available for trade as compared with size alone, he added, would also encourage public-listed companies, especially the bigger ones, to focus more on their existing capital structure.
“This will be an incentive for companies to increase their share capital free float,’’ Yusli said.
Exchange-traded products currently tracking the KLCI and FBM30 will move into the FTSE Bursa Malaysia KLCI. All KLCI futures and options contracts would also be subjected to changes in line with the transition of the underlying index, Bursa Malaysia said in a statement.
Bursa Malaysia engaged FTSE Group to develop a new set of Malaysian equity indices two years ago and the first set of modern indices was launched in June 2006.
On his outlook for the market, Yusli said sentiment on the local front was bogged down mainly by external developments.
“The condition remains very challenging, very volatile and I believe this will continue for a while,’’ he said.
Bursa Malaysia derived the bulk of its income from fees collected from trading of shares on the local exchange. The weak market was expected to have a big impact on its financial performance for the year ended Dec 31. The full-year results were expected to be out early next month.
22-01-2009: New index to replace KLCI from July 6
by Gan Yen Kuan
KUALA LUMPUR: A new index named FTSE Bursa Malaysia KLCI (FBM KLCI) will replace the Kuala Lumpur Composite Index (KLCI) as the benchmark index for the local bourse effective July 6.
The new index will see only 30 constituents, compared with 100 in the KLCI. These 30 component stocks will be picked based on their market capitalisation adjusted for free float and liquidity.
Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff said revamping the KLCI was the last leg of its effort to “internationalise” all of its indices.
Over the past three years, Bursa Malaysia has revamped all its major indices, with the exception of the KLCI. This family of indices is known as the FTSE Bursa Malaysia Index Series.
He said the FBM KLCI would integrate FTSE’s internationally accepted calculation methodology that would make the new index more tradable and transparent. The index would also adopt a higher speed of calculation of 15 seconds, compared with 60 seconds currently.
“This enhancement is important to ensure that the index remains representative in measuring the pulse of the Malaysian market trading activity while maintaining linked-standards to the global economy, so as to build our market’s competitiveness and relevance in the global arena.
“These 30 constituents which make up the index will be primary market movers that will more accurately define market activity,” he said at a media briefing on FBM KLCI here yesterday.
The current KLCI was launched on April 4, 1986. The upcoming FBM KLCI will comprise 30 largest companies on the Main Board that meet the minimum free float requirement of 15%, and a minimum 10% annual turnover of free float shares. The list of constituents will be announced after a review in June.
When it debuts on July 6, the FBM KLCI will use the closing value of KLCI on July 3, being the last trading day before the transition, as its opening value.
Subsequently, the existing FTSE Bursa Malaysia Large 30 Index will cease to operate, given that both Large 30 Index and FBM KLCI will have similar constituents (although the index values are different).
Asked why only 30 stocks would be chosen, Yusli said: “We believe that the 30 largest stocks will give a very good representation of the market performance. We have seen its (FBM KLCI’s) correlation to the Emas Index; it’s about 99%. If we were to add more stocks, it will not make any significant difference to those numbers.”
He said a period of six months was the optimal period of notice for market players to prepare for seamless and efficient transition to the new index.
Bursa Malaysia deputy chief market operations officer Chua Kong Khai added: “This six-month period will also enable those who track the FKLI (KLCI Futures) to deal with the contracts at appropriate time. At the same time, it allows fund managers to realign their portfolios as and when necessary.”
Chua said any analysis using the historical data of KLCI would remain fair and relevant, as its statistical analysis and computations showed that the FBM KLCI correlated 98% to the KLCI, and 99.1% to FBM Emas Index.
FTSE Asia Pacific managing director Paul Hoff said a committee of independent market practitioners would review the index twice a year in June and December.
“There are various rules to try to eliminate ‘too much change’. Maybe one or two stocks would change every six months, but we don’t anticipate a wholesale change. This is a very stable methodology. It is important for the fund managers and investment banks to make index-tracking products,” he said.
Asked if there would be heavy selldown of the remaining 70 stocks that would be excluded from the new benchmark index, Hoff said: “We will see some selling because there are some tracker funds. However, that selling would probably be relatively small in terms of the overall trading in the market.
“People do not use the whole basket of 100 stocks. They use 25 to 30 of the stocks. That gives us a reasonable level of assurance that by having this conversion to the 30-stock, large-cap index, that will meet the requirements of the traders,” he added.
Analysts say winners would include Resorts, Parkson and YTL Power International while Gamuda, SP Setia, IJM, Sarawak Energy and LaFarge are likely to be losers
RESORTS World Bhd and Parkson Holdings Bhd may benefit from a new benchmark index for the stock market but builders like SP Setia Bhd and IJM Corp Bhd may lose their spots, analysts said.
Bursa Malaysia plans to launch the FTSE Bursa Malaysia KLCI on July 6, an indicator with just 30 component stocks, down from 100 now.
The move is to make the main index more appealing to global investors as it will be based on free float or the number of shares available for trading and liquidity or the ease for investors to buy and sell shares.
Large investors whose portfolios mirror main indices may make changes.
"While there may be a near-term knee-jerk reaction, we believe adjustments in portfolios will only accelerate closer to the July 6 date," OSK Research said in a report.
HwangDBS Vickers Research said winners would include Resorts, Parkson and YTL Power International Bhd. They are now in the FBM30 index but not in the KLCI.
Stocks with a bigger weighting in FBM30 than in the KLCI would also benefit. This includes names like Public Bank Bhd, Bumiputra-Commerce Holdings Bhd and Sime Darby Bhd.
Stocks with a lack of free float, like Petronas Gas Bhd and MISC Bhd, would be affected, Maybank IB said in a report.
"Among the prominent mid-cap stocks which would most likely no longer be featured as index components are Gamuda, SP Setia, IJM, Sarawak Energy and LaFarge.
"However, the potential selldown impact by the tracker funds may not necessarily be significant as some tracker funds may not necessarily own these shares, as individually, they account for less than one per cent of the KLCI's market capitalisation," Maybank IB said.
