Bursa Malaysia Bhd Overview

Objectives of the Chapter

• Explain the structure of Bursa Malaysia Bhd
• Functions and roles of stock exchange
  • Primary market
  • Secondary market
• Explain the reasons for listing
• Describe Bursa Malaysia Indices
• Explain factors influencing stock market performance
• Explain factors for issuing Initial Public Offerings (IPO)
• Listing requirements for Bursa Malaysia
  • Main Market
  • ACE Market
• Explain the Corporate Disclosure Policy

Overview of Bursa Malaysia Bhd

• Bursa Malaysia Bhd (formerly KLSE): The stock exchange of Malaysia based in Kuala Lumpur; a major bourse in ASEAN.
• Regulation:
  • Acts as a regulator of Malaysia's capital market.
  • Maintains fair and orderly securities and derivatives market.
• Functions:
  • Maintains orderly dealings in securities and ensures efficient transaction clearing and settlement.
  • Issues rules for compliance from regulated entities such as listed issuers, traders, and brokers.
  • Actively supervises listed issuers and market activities.

Structure of Bursa Malaysia

• Bursa Malaysia Berhad: Parent company overseeing several subsidiaries including:
  • Bursa Malaysia Securities Berhad: Manages the securities exchange.
  • Bursa Malaysia Derivatives Berhad: Manages futures and options exchange.
  • Bursa Malaysia Depository: Central depository for listed securities.
  • Bursa Malaysia Clearing Sdn. Bhd.: Facilitates clearing for securities and derivatives.
  • Bursa Malaysia Bonds Sdn. Bhd.: Operates electronic trading for bond markets.
  • Bursa Malaysia Islamic Services: Manages Shari'ah-compliant trading platforms.

Roles & Functions of the Stock Exchange

• Raising Money for Businesses:

  • Facilitates companies in raising capital by selling shares to public investors.

• Mobilization of Savings:

  • Provides a venue for individuals to invest, leading to better resource allocation and business activities.

• Facilitating Company Growth:

  • Mergers or acquisitions through the stock market provide opportunities for corporate expansion.

• Creating Investment Opportunities:

  • Allows small investors to participate in market and own shares alongside larger investors.

• Economic Barometer:

  • Stock price movements reflect economic conditions; market crash may result from economic downturns.

• Corporate Governance:

  • Greater shareholder diversity leads to improved management standards within companies.

Reasons for Listing

• Confidence: Enhances credibility and trust.
• Expansion: Provides financing for business activities.
• Additional Funds: Access to capital markets for raising funds.
• Higher Profile: Increases visibility of the company.

Factors Influencing IPO Decisions

• Timing: Choosing the right moment to issue shares
• Method of Listing: Direct public offering, traditional IPO, etc.
• Underwriting the Issue: Securing financial backing.
• Pricing: Setting the price correctly based on market demand.
• Corporate/Capital Restructuring: Adjusting company structure for better market acceptance.

Market Capitalization

• Definition: Market capitalization is the total market value of a company's outstanding shares.
• Calculation: ext{Market Cap} = ext{Shares Outstanding} imes ext{Current Share Price}
• Significance: Used to determine company size, influencing investment decisions.

Bursa Malaysia Indices

• Key Indices:
  • FTSE Bursa Malaysia KLCI: The benchmark index comprising the 30 largest companies.
  • Various Sectoral Indices: Include indices for construction, finance, technology, etc., each with specific base years.

Factors Influencing Stock Market Performance

• Economic Performance: General health of the economy.
• Interest Rates: Impact on borrowing and investment costs.
• Reported Earnings: Company profitability affects investor confidence.
• Oil Prices: Fluctuations affect broader economy.
• Political Environment: Stability and policies influence market trends.
• International Environment: Global economic conditions affect local markets.
• Entry of Institutional Investors: Large players can sway market performance.

Corporate Disclosure Policy

• Objective: Ensures that the public has access to essential information for decision-making.
• Core Policies:
  • Immediate Public Disclosure: Timely reporting of significant corporate events.
  • Public Dissemination: Information should reach the public effectively.
  • Response to Rumours: Companies must clarify or deny false information promptly.
  • Response to Unusual Market Activity: Inquiries into significant trading fluctuations.
  • Promotion Compliance: Avoid excessive promotional activities without basis.
  • Insider Trading Prevention: Restrictions on trading based on undisclosed material information.

Penalties for Breach of Listing Requirements

• Public Reprimand: Issued for rule violations.
• Trading Suspension: Temporary halt on security trades.
• Impositions on Sale of Shares: Conditions on share sales may apply.
• Delisting: Removal from the Bursa Malaysia official list.
• Other Penalties: Additional actions deemed necessary by Bursa Malaysia.