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Bursa Malaysia welcomes Chinese IPOs

Updated: 2012-10-31 11:10
By Tom McGregor (

Bursa Malaysia, the stock exchange in Kuala Lumpur, hopes to generate larger market capitalization. Malaysia's Deputy Finance Minister Datuk Donald Lim has called for more Chinese corporations to get listed on the nation's stock exchange.

Bursa Malaysia welcomes Chinese IPOs

He explained that China is the world's second largest economy and that more China-based initial public offerings can "deepen and broaden" the market.

Malaysia intends to upgrade its economic standing in global business rankings by encouraging more stock market investments and to add more public-listings of companies on its stock exchange.

For many years, Malaysia appeared to be lagging behind its closest neighbor, Singapore, although the country can lay claim to lower labor costs, cheaper land and more coastline area for its ports.

After Singapore became a sovereign city-state, it has developed from third world to first world status by centralizing its government to ensure greater transparency, root out corruption and enforce stringent regulations on businesses to provide a fair platform for foreign direct investments. The Singapore Stock Exchange has captured a remarkable reputation worldwide.

Kuala Lumpur appears to be attempting to create the Malaysian version of the Singapore success story. Its government has taken the crucial step of establishing a more prominent stock exchange with rigorous regulations to prevent fraudulent companies from manipulating the market.

"Malaysia also has improved its corporate governance record," according to the Financial Times. "It moved up in this year's Asian Corporate Governance Association rankings after amended listing rules requiring companies to provide segment analysis in notes to quarterly reports, as well as better cash flow disclosure."

The chief executive of Bursa Malaysia, Tatuddin Atan, told the Financial Times that the Bursa refuses to loosen standards to add more publicly listed companies.

"If you want to raise money here, it is my obligation to my investors to say is this a quality company," he said. "We are not letting any Tom, Dick and Harry raise money here."

Well, here's when Chinese companies can push for more expansion into the Southeast Asian region by getting listed on Bursa Malaysia. Although it entails extensive auditing procedures, this would be a golden opportunity for companies to show verifiable proof of their strong balance sheets.

Right now, just 10 Chinese companies are listed on the Malaysian Board. Minister Lim told The Star newspaper of Malaysia that he hopes for a stronger Chinese presence here.

"I believe we need to do more to attract more companies from China and developed countries to list here, as well as those companies that want to take advantage of the growing A-shares market," he said at the 17th annual Malaysian Capital Market Summit that was organized by the Asia Strategy and Leadership Institute."

Lim contends that the best opportunities would be for small to medium-sized enterprises to seek a public listing in Kuala Lumpur, since they could "look at the capital market to raise funds for expansion and working capital," he said.

Experts forecast GDP growth of 5 percent due to stronger domestic consumer demand, rising tourism and booming construction. Bursa Malaysia holds another advantage, since government measures encourage pension funds in the country to invest in its stock exchange.

The Star reports that, "Private Pension Administrator chief executive officer Datuk Steve Ong said there was potential for private pension funds to reach RM (Malaysian currency) 1 trillion ($327 million) in 25 years."

Ong based his projections on the likelihood that 13 million working Malaysians would each contribute RM 3,000 ($1,000) per year over that period. This should not be considered a "rose-colored" outlook.

The country has a Muslim-majority population and the Islamic faith endorses strong family values in which adults are expected to get married and raise children. Hence, Malaysia's age demographics would remain young for many years to come.

Chinese companies preparing to go public in Malaysia could expect a flush of pension fund investments to keep its shares afloat. If so, Chinese companies on Bursa Malaysia could bloom in the tropical nation.

The views do not necessarily reflect those of China Daily.