Business

Friday April 3, 2009

Foreign ownership of local firms down to 20%


The figure is in line with Bank Negara data on fund outflows

KUALA LUMPUR: Foreign ownership of companies listed on the local stock market has dropped below 20% from the peak of close to 30% in 2007, said Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohammed Yusoff.

Foreign ownership of Bursa Malaysia, the operator of the exchange, had also declined significantly to 18% from a high of 44% in 2007, he said at the company’s AGM yesterday.

The figures are in line with Bank Negara data which showed an outflow of some RM90bil in the past six months, mostly from the equity market.

From left: Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff, chief operating officer Omar Merican and chief regulatory officer Selvarany Rasiah.

Bursa director and Malayan Banking Bhd president and CEO Datuk Seri Abdul Wahid Omar said the bank’s foreign shareholding was currently at its lowest level of 10%, compared with the peak of 24%.

Yusli said that of the 17 new listings last year, only three were trading above their offer prices. Bursa’s share price, meanwhile, tumbled about 64% last year, in tandem with the 62% to 74% fall in the prices of its peers.

At a media briefing later, Yusli said there was sustained interest in the local market with an average 35% of daily trading volume coming from foreign investors. Nonetheless, the overall volume has dropped significantly.

To mitigate the impact of the global slowdown on earnings, the exchange planned to reduce operating expenses by 15% and cut capital expenditure (capex) this year to conserve cash.

About 70% of operating costs comprised human resources and technology. As at end-December, Bursa had some RM400mil in cash and cash equivalent.

“We’re reviewing each (capex) item and would prioritise accordingly. We’re confident of being able to reduce capex substantially from the budgeted RM84.5mil,” Yusli said. On expenses, the exchange would strive to reduce variable costs such as bonuses. Bursa aims to complete 15 initiatives this year such as the launch of the Commodity Murabahah House (CMH) in mid-year, multi-currency products in the first half and a unified board in the second half.

Others include the development of an Islamic securities selling and buying facility, thematic exchange-traded funds on plantation companies and adopting FTSE global index methodology for the KL Composite Index.

Yusli said initially, CMH would be ringgit-denominated but eventually would be opened to foreign currencies “because we want to attract foreign investors.”

“Despite being affected by the volatility in the global markets and the financial crisis, we have not scaled down our efforts to develop and promote the market further in readiness for an upturn,” he added.

There should be signs from the economic data of an improvement before confidence could return. “Market recovery should be based on fundamentals instead of speculation,” Yusli said.


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