Why should we always follow?

This article below titled " Price Trading rules for Bursa" appears in The StarBiz today. The sub headline was :"Some retail investors believe counters with low share price and lacklustre trading should be de-listed" My comments are in red.

Trading volume in a number of lower liners has risen, with penny stocks such as Pilecon Engineering Bhd, PECD Bhd and Mesdaq-listed Wimems Corp Bhd now suspended from trading, having been heavily sold down to below 10 sen per share. The feeling among some retail investors is that counters with low share price and lacklustre trading should be de-listed. Of course everybody has his or her own views but I dare say that the majority of retail customers do not have such sentiment. Those that are still holding or just bought such stocks will be waiting to sell for a higher price and will never want it to be de-listed (hoping someday it will be saved by a white knight or more favourable business proposals to come) while those that have not bought it could not care less. Punters will definitely want these penny stocks to stay for punting purposes.

Apparently, the New York Stock Exchange (NYSE) has a "quantitative continued listed standard" rule to make it possible to de-list a stock that is trading below US$1 for 30 consecutive trading days. If the rule in Malaysia is RM1.00, many of our listed companies will have to close shop. Please go here to check out about a US company that was affected by this ruling and the procedures to "cure" this problem.

So why not on the local bourse? Simply due to practical reasons. We already have rules and regulations on suspension and delisting of companies (refer comments below). Further, what price are you going to set for stocks to be considered delisting, 1 sen, 10 sen , 20 sen or ? Do you realise that low trading price does not always mean low quality or valuation and as such warrants delisting. Sentiment does not always corresponds with fundamentals. Even if it is a low quality stock with low price, so what? Buyers need to be aware what they are buying. It is "you buy, I sell or vice versa situation". Can the authorities detect if the share was being sold down on purpose for reasons known only by the seller. Further, would the company be held responsible if the share price hits the delisting price level? Can the shareholders, bankers and suppliers etc sue the company as it caused them to lose money? We do not have the market makers, the depth, volume, liquidity compared to matured markets. In terms of market capitalisation, our markets are liken to be a tiny rice in a bowl of rice. According to Wilshire Associates, the total US market capitalisation is approximately US15.35 T (May 23, 2007) or 51 x Malaysia's. I would think even Singapore does not have this rule implemented as it is not practical and viable for their markets.

Bursa Malaysia Bhd chief regulatory officer Selvarany Rasiah said there was currently no policy on Bursa Malaysia to de-list penny stocks or securities that are trading below certain price levels."The present de-listing criteria are not based on price but on major non-compliance on the listed companies' part with the Listing Requirements,'' she told StarBiz. "The three listed issuers named are classified under PN17 and GN3 as the case may be, as having poor financial condition."Selvarany added that Bursa would continue to monitor developments domestically and internationally."Changes and improvements to the rules will be made as and when necessary, to keep pace with the changing market environment," she added. The existing rules eg PN17/GN3 and PN16/GN2(Cash Companies) are good guidelines for financially distress companies to opt for a regularisation plan on a stipulated period to be approved by the SC and other relevant authorities. Any delays in meeting the set deadlines by Bursa would qualify for a suspension and delisting accordingly. We do not always need to follow what other markets have if it is not practical to us ... we have not reached NYSE's standards or even Singapore's yet. Thank god this Bursa lady is not as gungho as the reporter who wrote this article. I would say, we or for the matter Bursa, should instead be more focus and proactive in encouraging quality companies to list here or to remain listed here. Far too many good Malaysian or overseas companies have bypassed the KLSE to somewhere else.

* Buffett is acting like a "lad in a candy store again". He and Mars have agreed to buy Wrigley for USD23B. Apparently they will pay a premium of almost 30% based on Wrigley's current price. After the merger, Mars-Wrigley will hold about 15% of world's confectionery/sweet market share compared to Cadbury's 10%. Will this merger be the start of more M&As to come?

* BT Singapore: Mikhail Bolotin, one of Russia's richest men, reportedly paid US$100 million in June last year for Dunham-Bush in Malaysia, got it de-listed and is now moving the company's headquarters to Singapore. He is seeking a listing of the Malaysian company on the Singapore Stock Exchange to raise US$1 billion. Malaysia's lost is Singapore's gain!