Bursa's new measures: More Questions than Answers

In his keynote address at the Invest Malaysia 2008 Conference yesterday, Abdullah, who is also the Finance Minister, said Malaysia would continue to build upon its strong foundations and take its economy to the next level.

The measures announced yesterday are:-

1. Merging the main and second boards of Bursa Malaysia and revamping the Mesdaq. On completion of the exercise, there will be two new boards instead of three currently;

MyTake: What equal opportunity to the second boarders? (according to SC) What's the point if after merging, second board rules and requirements will be followed. Standards will be lowered. Seems that SC wanted more companies to be listed and Quantity of companies is the main objective of the SC rather the Quality. Foreign funds are interested in quality ones which are easily available in our neighbouring markets; we need to buck up and send the right signals to the investing communities.

2. Bursa Malaysia will establish a market-making framework, where market makers will be obliged to be present in the market at all times to provide liquidity. This initiative will also help price discovery and promote innovation;

MyTake: Good move but transparency and intergrity by brokers and investment banks are upmost important for it to be fair and orderly.

3. The government will extend its existing “green lane” process for bond offerings to all domestic or foreign issuers that are rated “AAA” by domestic rating agencies or a minimum “BBB” rating by international agencies. Such issuances are “deemed approved” and issuers will only need to submit their applications to the Securities Commission (SC) as a matter of formality;

MyTake: I am not sure about the bonds' quality with such liberalised approval framework.

4. Ringgit bond issuers with “deemed approved” status will be exempted from trust deed and trustee requirements, something that is in line with international practices; and

5. The government will allow for the establishment of a third credit rating agency, where foreign strategic partners can hold up to 49% equity interest.

MyTake: Why do we need a 3rd agency after RAM and MRC? Competition? I would say most importantly any agency must operate on international standards or higher. Having said that, earlier S&P's AAA ratings on some U.S bonds/mortgages are really a joke.