Petaling Jaya (The Star/ANN) - Starbizweek conducted a question and answer session with Bursa Malaysia CEO Datuk Tajuddin Atan (pic) on the Asean Trading Link and below are the excerpts:
What does the Asean Trading Link mean for Bursa Malaysia, the investors in this country and where do you hope to go with this trading link?
Last April in Bali, the Asean exchange collaboration started at the back of the AEC (Asean Economic Community) meeting involving the finance ministers. That was the first milestone. The question was what did we want to accomplish? I had spoken about the need to embrace competition, increase efficiency, hence the reason I had spoken about friction.
It was about how we looked at ourselves and measure against the rest? We have Asean collaboration and we have freer capital over a period of time, we ask ourselves how can we link this. We wanted to get moving on something that can work and the exchange chiefs sat down and decided to have some linkage.
Before that, we had so many problems and couldn't move. I spoke with Stock Exchange of Thailand CEO Charaporn Jotikasthira and Magnus Bocker, CEO of Singapore Exchange, and said how do we go about doing this. Singapore said it was game to go ahead with the link and SET was too.
The exchanges have for a long time been in competition with each other. Is it an uneasy alliance?
To a certain extent it is. For Malaysia and Singapore, I don't think it's much of an issue. Trade is going on anyway. A large chunk of trade out of Singapore, about 40%, is Malaysian. CIMB, Maybank and OSK have the bulk of the trade. Familiarisation is there. The Asean link facilitates trade.
Thailand has a big retail business, but there's nothing much between the two of us. We are friendly neighbours and they do their thing and we ours. But investors today are very abreast with world news. They talk about the US and European markets, but they don't know what Thailand is doing. My question is that if Malaysian investors want to invest in the top 30 companies in Thailand, why not?
For a start, familiarisation needs to be done but access must be granted. That accessibility is what we are working on. Competition is there but it is to a certain extent quite minimal.
On the flipside, having only three of them will lead to questions but if you want a wholesome and complete before it's done, I don't think the link would have been done. We would not have been able to launch on Tuesday.
The Asean collaboration is interesting because you have an advanced market in Singapore, and we and Thailand are classified as advanced emerging markets and there are frontier markets. It's not going to be one size fits all and it's about getting 70% of the market capitalisation into the link and the rest should come in.
Do you expect Indonesia to join?
Yes. We have done our part and we have an open access for the Indonesians to join whenever they are ready. Philippines has said it needs roughly two years. I say let those who are ready at different stages of preparedness come on board.
Will the different stages in which the markets are operating in also affect and influence interest in that particular market at the expense of lesser developed markets?
The movement of the markets are different. What do investors want? Number one is dividend. Dividend yield is helluva play of late. The other is capital gain and protection level. Different markets present a different play. If investors come in and say they just want to invest in Singapore alone, then you will be wondering what is it they are offering? Thailand seems interesting and Malaysia has these big IPOs of the world.
We can have the breadth of the market by being integrated as one Asean market. It's a tough offering because the Malaysian market is small and how much more can you grow? If we only trade within, maybe there are others outside who will say they want a share of the Malaysian growth story. Maybe then, investors from Europe and the US want to come in. Then do we go to each company or go to Bursa Malaysia and have access to all of Asean? We want to be the centre of Asean.
How is the exchange going to educate investors to use this trading link?
Bursa Malaysia has been working tirelessly for years to educate and improve our retail participation. Then there is international acceptance hence the reason why we have Invest Malaysia, our market chat.
On the Asean collaboration, we will try to educate, promote and market Asean collaboration under the flagship of the Asean Stars.
We will the 18th CEO meeting to say "lets spend some money"
Is having the Asean trading link a costly affair?
We will try to keep it to a minimum. When we calculated the amount among the three of us, I said we should be able to absorb that amount.
The amount is not really expensive but we need to do this. It's not (going to be a success) overnight but this needs to continue.
Will the link benefit the brokers more or the companies listed on Bursa Malaysia through greater regional interest?
The big brokers are already linked before the Asean trading link was established. The Asean link now allows for a single point of access for the smaller brokers which do not have the link. Its like if there is already a highway, we are building a separate trunk road for the big boys. Its either they go through their own platform or there is another access for them. For the rest of the guys that don't have access, they can now say they can play the same game. The benefit will most probably go for both, the brokers and the listed companies. Now the listed companies can project what they can do or sell outside Malaysia.
You speak about how the link can benefit the brokers but only about a third of the number of brokers in Malaysia have actually participated. Why such a low percentage?
This is a start. There is an attitude to watch and see what happens. I imagine that once trade flows are attractive, I can see the others joining in.
Have you seen an expression of interest from them?
Yes. A lot of them are interested. There are not many that disagree but it boils down to the state of readiness. But the main guys are in.
The ones that have joined, what sort of market share do they have of the trading business in Malaysia?
It's over 50%. It's sizeable. For those who have not joined and want to concentrate solely on domestic trade, then there is no reason why they should come on board. It's their business call.
If you look at the number of products Singapore has to offer via the link, Malaysia is lagging behind. Will the link hamper the development of competing products with what Singapore has or will you push ahead to compete on an equal footing?
Definitely. A link is access and after that, assuming the volume of trade rises remarkably, as an exchange each of us will be wondering if it does not facilitate and improve the trading environment, funds will flow out. If there is not enough products in an exchange and there is interest in such products, then the question is why isn't such products onshore. This provides induced competition whether you like it or not. If the issue is stamp duty, then it has to go. If it makes sense to get trade and turnaround times of certain products, we better do it.
Is that helpful in how you are starting to introduce this link at a time when people are starting to do these takeovers and acquisitions within South-East Asia?
There are two parts in it. Currently we are only talking about the trading side. Even that, I think the only one that attracts interest of late is IHH, the IPO of which was done between Singapore and us. If M&As were more active in this region, I would imagine that the attraction of where capital has been sourced, where the companies would be listed, is interesting.
We are not in the old days. The current trend is if you don't do it, someone else will. Malaysia has a very interesting proposition because three out of five of the biggest investment banks are Malaysian. That benefits and allows them to promote what they do here also in Thailand and in Singapore.
Among the questions we asked you earlier are what are the issues and challenges you foresee the link facing, the growing pains of this. It was kicked off on Tuesday. What was the performance like? What has interest been like?
There was trading. It took place very early on in the morning. Our interest in that point in time was, is there any hiccups? Is there any problem in getting the deals through? So far it is good. Traction wise, it will take a while. The challenge here is how do we continue to provide interest in this. The challenge now is to bring Thailand on board and then communicate the asset class and how we go about it. Of course, we hope more exchanges will come in but I can't tell you when they will. Suffice to say, we must build enough momentum and interest in this project to get people excited and attracted in this particular area.
You also have the responsibility as a CEO of a listed company in performance targets and earnings to take care off. How are you going to promote Singapore and Thai securities, whereas your fundamental duty is to also develop and promote Malaysian equities?
Each exchange would sit down and agree on what kind of information, data and research that is to be uploaded. We have a website, www.aseanexchanges.org, but my job is still onshore, to ensure the attractiveness, the vibrancy of this exchange coming into place.
Who will do the promoting?
Us, the exchanges but not completely and it will be through the Asean collaboration. Individually the brokers would need to do this. In the Asean exchange collaboration, there is a commitment to build the asset class together. The awareness, all the seven exchanges agree: the website, our storyboards are all connected. But it doesn't preclude us from promoting our own market in those places in our time.
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