KUALA LUMPUR: How do you keep retail investors coming to the stock exchange? Especially when your current retail investor base is made up mainly of baby boomers aged between 60 and 78?
Bursa Malaysia Bhd's answer was something it has not done in its 60-year history — build a relationship with investors.
It started with the stock exchange regulator holding focus groups and asking Malaysians of all walks of life whether they would invest in Bursa Malaysia.
Baby boomers were quick to say yes, while the young responded with, "What is Bursa?"
Therein lies the exchange's raison d'etre for its transformation to a multi-asset exchange.
"Our retail investor base are the baby boomers who are not getting any younger. And we want to continue and have more retail investors joining us.
"So we need to create relationships to bring this new group of investors on a journey which one hopes is having equity at the end of it," Bursa Malaysia chief executive officer Datuk Muhamad Umar Swift said in an interview.
This led to the launch of direct-to-market investment products and services such as Bursa Gold Dinar, MyBURSA customer portal and Bursa Reach earlier this year.
"Bursa Gold Dinar is new to us because we never had a direct trading platform with it. Right now, we are navigating the e-KYC (electronic know-your-customer) and the necessary. I am happy to say that the product works, we have got good support and it is price-competitive," said Umar.
The syariah-compliant gold trading platform, which allows investments as low as RM10, has seen 17,098 downloads since its launch on Jan 16.
"Our overarching ambition, our thought process behind it, is to bring in a new group of retail investors and offer them products that commensurate their risk appetite while also educating them on other products," Umar said on MyBURSA.
All these efforts are to ensure that the stock market continues to have a strong base of retail investors.
As at Dec 31, 2023, the total retail participation in the market stood at about 30 per cent.
Data provided by Bursa Malaysia showed that the number of retail participants had steadily risen since 2018 and peaked during the Covid-19 pandemic.
In 2020 and 2021, retail participation in the market jumped to a high of 37.8 and 37.6 per cent, respectively.
"We looked at the demographics and we know we have young people trading. We also know it is the baby boomers who trade more. Baby boomers have wealth and in theory, that wealth will be inherited by the younger generation. So let's start that relationship. We want that transition. We want to create that spark of interest and move to fulfilment. As they gain knowledge and have more disposable wealth, they will put it in the market. That is the strategy," said Umar.
He said while the entry of products like the Bursa Gold Dinar could bring in new types of investors, the equity market would always be a big part of its business.
Sterling start to 2024
Bursa Malaysia started the year well, with FTSE Bursa Malaysia KLCI hitting new highs in February, a record last seen in 2022.
The equity market's average daily volume (ADV) jumped 41 per cent to RM2.91 billion year-on-year as at March 14. ADV for 2023 stood at RM2.06 billion.
Top-performing sectors were utilities, energy and construction, while the technology sector was the only one to contract as at March 14.
Foreign net inflow as at March 14 stood at RM24.5 million, with the utilities sector recording the highest inflow of foreign funds with RM1.12 billion, followed by the property sector with RM399.01 million and telco and media with RM206.48 million.
Bursa Malaysia was ranked the second highest in the number of new listings in the region, with six as at March 8 that raised RM376.57 million in capital. Bursa Malaysia ties with the Stock Exchange of Thailand, which raised RM1.28 billion from initial public offerings (IPOs).
Bursa Malaysia is eyeing 42 IPOs this year.
Umar said most were headed to the ACE Market. Seven companies will be on the Main Market and one is slated for the LEAP Market.
"We have got companies which provide in-vitro fertilisation services... things we have not seen before coming to market. They have been on the LEAP Market and are now coming to the ACE Market.
"We are also seeing cybersecurity (companies), different and interesting companies. As the economy evolves, we anticipate offerings that are part of the new economy. That is good and healthy," he said.
Last year, the exchange saw 32 IPOs, of which seven were on the Main Market and one was on the LEAP Market. The remaining were on the ACE Market.
The IPO market capitalisation for last year stood at RM13.6 billion. Overall market capitalisation grew 3.5 per cent year-on-year to RM1.8 trillion from RM1.73 trillion at the end of 2022.
Attracting the young with fractional trading
Unlike baby boomers, Umar said younger investors were more inclined to participate in fractional trading, which is ownership of less than a share.
"We are looking at reducing the size of board lots, or larger, more expensive shares, to make them more affordable. We follow the development of fractional shares in New Zealand. They introduced fractional trading and they have young investors. There is a fine line between gamification and making it exciting. We are market operators, we are slightly different," he added.
The Securities Commission (SC) revised its guidelines in September last year on Market Conduct and Business Practices for Stockbroking Companies and Licensed Representatives to allow stockbroking companies to offer fractional share trading services.
Fractional trading will see reductions in a standard board lot, which currently is 100 shares. However, this is not applicable to all board lots.
"That will be launched this year. But we also would like to go one step further. We would like to bring the idea that anyone could have maybe RM10 or RM15 invested in their account. Maybe they can take from their e-wallet, buy shares with it and liquidate these shares to put them back in the e-wallet. We want that kind of flexibility.
"It is about making sure people are empowered to trade as they wish. With the advent of prepaid trading accounts and very low brokering fees, this is attainable in a cost-competitive manner.
"We just need to put in place the technology. We will run proof of concept with other broker partners and test what works and what doesn't, and we will get it to the SC.
"We will see if that works. We are trying different things to look at people's investing behaviour," Umar said.
He said the exchange took a similar route with the rising interest in gold investment, which led to the formation of Bursa Gold Dinar.
Keeping investor
confidence
The vibrant market this year also saw the share prices of a slew of companies plunging.
This led to Bursa Malaysia issuing multiple unusual market activity (UMA) queries to the affected companies.
"What we want to see is a healthy, investing environment. The market's supervision team is looking at the trade that is happening for unethical behaviour.
"There is a whole process. When we see something we do not like, that team will engage. On UMA, there are precursors where we share with the compliance team, the broker, where we have conversations about behaviour we are seeing and perhaps they might look into it closer before we start the query," he said.
To ensure a conducive and healthy trading environment, Bursa Malaysia has teams that look into separate operations of trading.
To keep information readily available for investors, Umar said Bursa Malaysia was "reassessing and relooking" the kind of disclosures that should be done to equip investors to make better decisions.
One of the actions taken by Bursa Malayisa is looking at its Listing Requirements to ensure they are relevant.
"One of the pieces we are looking at is enhancing transparency on fundraising mechanisms involving new issuance of securities and placement exercises, status of utilisation of proceeds, security fundraising exercise and proceeds yet to be used.
"Those proposals are aimed at equipping shareholders and investors with relevant information so that they can make informed decisions. It also accords them with a better understanding on how the funds they contributed have been utilised and whether the listed issuer has achieved its stated objectives.
"We empower the shareholders for a conversation to be had between the shareholders and the company," he said.
The consultation paper was issued on Nov 30 last year and was closed on Jan 26, with the last feedback received on Feb 8.
Generally, Umar said the stakeholders consulted were supportive of the proposals.
"Some provided additional suggestions. We are reviewing whether further changes to the proposals are required."
When it comes to the market, there is a team that oversees market operations or trading behaviour. A separate team is available to monitor how companies are behaving.