Bursa Malaysia

The Bursa Malaysia (MYX: 1818) or Malaysia Exchange, MYX previously known as Kuala Lumpur Stock Exchange (KLSE, Bursa Saham Kuala Lumpur in Malay) dates back to 1930 when the Singapore Stockbrokers' Association was set up as a formal organisation dealing in securities in Malaya. In 1937 it was re-registered as the Malayan Stockbrokers' Association, but it still did not trade public shares.

By 1960s, the Malayan Stock Exchange was formed and public trading of shares began on 9 May. In 1961, the Board system was introduced whereby two trading rooms, one each in Singapore and Kuala Lumpur, were linked by direct telephone lines into a single market with the same stocks and shares listed at a single set of prices on both boards.

The Stock Exchange of Malaysia was officially formed in 1964 and in the following year, with the secession of Singapore from Malaysia, the common stock exchange continued to function under the name Stock Exchange of Malaysia and Singapore (SEMS).

In 1973, with the termination of currency interchangeability between Malaysia and Singapore, the SEMS was separated into The Kuala Lumpur Stock Exchange Bhd (KLSEB) and The Stock Exchange of Singapore (SES). Malaysian companies continued to be listed on SES and vice-versa. A new company limited by guarantee, The Kuala Lumpur Stock Exchange (KLSE) took over operations of KLSEB as the stock exchange. In 1994, it was re-named Kuala Lumpur Stock Exchange.

Kuala Lumpur Stock Exchange became a demutualised exchange and was re-named Bursa Malaysia in 2004. It consists of a Main Board, a Second Board and MESDAQ with total market capitalization of MYR700 billion (US$189 billion).

In 2005, Bursa Malaysia was listed at its own exchange on 18 March. On 18 April, Bursa Malaysia introduced CBRS, a scheme which allows all investors to access research reports of Bursa-listed companies free-of-charge.

The main index for Bursa Malaysia is Kuala Lumpur Composite Index (KLCI). However, in June 2006, a new index series jointly developed by Bursa Malaysia and FTSE Group was introduced which is FTSE Bursa Malaysia Index.

On November 7, 2006, the index finally passed the 1,000 mark hurdle and closed at 1,003.28. It was partly boosted by the strong overnight close in the Wall Street.

As of 31 December 2007, the Malaysia Exchange had 986 listed companies with a combined market capitalization of $325 billion.^[2]

History

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The first formal securities business organisation in Malaysia was the Singapore Stockbrokers' Association, established in 1930^[3]. It was re-registered as the Malayan Stockbrokers' Association in 1937. The Malayan Stock Exchange was established in 1960 as the bourse for public trading of shares in Malaya. The board system with trading rooms in Singapore and Kuala Lumpur, linked by direct telephone lines into a single market with the same shares listed at a single set of prices on both boards, was established in 1961.

By 1964, the Stock Exchange of Malaysia was established. With the secession of Singapore from Malaysia in 1965, the Stock Exchange of Malaysia became known as Stock Exchange of Malaysia and Singapore. In 1973, with the currency interchangeability between Malaysia and Singapore ceased, the Stock Exchange of Malaysia and Singapore was divided into KLSEB and SES. The Kuala Lumpur Stock Exchange which was incorporated on December 14, 1976 as a company limited by guarantee, took over the operations of KLSEB in the same year.

The Kuala Lumpur Stock Exchange Berhad was demutualized pursuant to the Demutualization Act and converted into a public company limited by shares on January 5, 2007. Upon the conversion, the organization vested and transferred the securities exchange business to a new wholly-owned subsidiary, Bursa Securities, and became an exchange holding company and were renamed Bursa Malaysia Berhad on April 14, 2007.

From the legal perspective, the demutualization essentially entailed the conversion from a not-for-profit "mutual" entity limited by the guarantee of its members into a company limited by shares. However, from the business strategy perspective, the demutualization, supported by business transformation initiatives, is intended to further enhance its corporate, organizational and governance structures.

On 18 March 2005, Bursa Malaysia made its debut on the Main Board of Bursa Malaysia Securities Berhad with a 17% or RM0.50 premium over its retail price of RM3.00. top

On 6 July 2009, the Composite Index has been replaced by FTSE Bursa Malaysia KLCI index which reflect the top 30 companies in the exchange.^[4]

On 4 August 2009, the exchange has combine the main board and the second board into a single market which is called the "Main Market". Mesdaq is also renamed into ACE market which provide lower listing requirements.^[5]

Events

On March 10, 2008, trading on the exchange was suspended for one hour due to composite index fall by more than 10 percent or 130 points to 1166.32 points. This was largely by combination of factors such as the United States Subprime mortgage crisis and the political uncertainty caused by the 12th General Election. Dealers expected the move was an overreaction to the election results and the market will correct itself.^[6] The index gained 2.1% the next day on the morning session as investor reinvest in plantation stocks and blue chips.^[7]

On July 3, 2008, trading on the exchange was suspended for the day when it suffered multiple hardware glitches. The glitches only affected the equities market, not the bonds and commodity market.^[8] Trading resumed the next day.

Largest Stocks by Market Value

Source: Bloomberg, in billions of RM, Data updated on 30 November 2009

1. Sime Darby Berhad (MYX: 4197) - RM53.24
2. Malayan Banking (MYX: 1155) - RM47.21
3. CIMB Group (MYX: 1023) - RM44.71
4. Public Bank (MYX: 1295) - RM37.71
5. Tenaga Nasional Bhd (MYX: 5347) - RM36.49
6. IOI Corp Bhd (MYX: 1961) - RM33.62
7. MISC Bhd (MYX: 3816) - RM33.16
8. Genting Group (MYX: 3182) - RM26.82
9. Axiata Group Berhad (MYX: 6888) - RM24.74
10. Petronas Gas Bhd, a subsidiary of Petronas (MYX: 6033) - RM19.35
11. Perlis Plantations Bhd (MYX: 4065) - RM17.95
12. DiGi Telecommunication(MYX: 6947) - RM16.98
13. PLUS Expressway Berhad (MYX: 5052) - RM16.50
14. Genting Malaysia berhad (MYX: 4715) - RM16.24
15. Kuala Lumpur Kepong Berhad (MYX: 2445) - RM16.01
16. AMMB Holdings Bhd (MYX: 1015) - RM14.24
17. YTL Corporation Bhd (MYX: 4677) - RM13.83
18. YTL Power International Bhd(MYX: 6742) - RM12.84
19. British American Tobacco Malaysia Bhd (MYX: 4162) - RM12.83
20. Hong Leong Bank Bhd (MYX: 5819) - RM11.84
21. RHB Capital Bhd (MYX: 1066) - RM11.61
22. Telekom Malaysia (MYX: 4863) - RM10.80
23. Petronas Dagangan Bhd, a subsidiary of Petronas (MYX: 5681) - RM8.84
24. Nestle (Malaysia) Berhad (MYX: 4707) - RM7.78
25. MMC Corporation Berhad (MYX: 2194) - RM7.61
26. UMW Holdings Bhd (MYX: 4588) - RM7.03
27. Hong Leong Financial group Bhd (MYX: 1082) - RM7.61
28. Astro All Asia Networks (MYX: 5076) - RM6.42
29. Gamuda Berhad (MYX: 5398) - RM6.35
30. IJM Corporation Berhad (MYX: 336) - RM6.34

Palm oil futures

Bursa Malaysia is the world's biggest palm oil futures trading hub since 1980. The FCPO, the global price benchmark for the crude palm oil market, is a deliverable contract which is traded electronically on Bursa Malaysia’s trading platform.^[9]

Crude palm kernel futures and crude palm oil futures are primarily traded on Bursa Malaysia in Malaysian Ringgit (MYR) and US dollar denominated contracts. Their codenames are FPKO, FCPO and FUPO, respectively.

Below is a non-exhaustive list of commodities exchanges around the world where palm oil futures is traded with different contract specifications:

• MDEX: Bursa Malaysia Derivatives Exchange
• DC: Dalian Commodity Exchange
• NCDEX: India's National Commodity and Derivatives Exchange

In August 2009, Bursa Malaysia launched Bursa Suq Al-Sila', the world's first Internet commodities trading platform with crude palm oil (CPO) as its underlying asset that is syariah-compliant.^[10] Bursa Suq Al-Sila', formerly known as Commodity Murabaha House, facilitates commodity-based Islamic financing and investment transactions under the Syariah principles of Murabahah, Tawarruq and Musaw-wamah. Under the Bursa Suq Al-Sila concept, the bank buys a commodity from a supplier such as a CPO producer at a principal amount, and sells it to a customer at a profit. The customer then sells back the commodity to the spot market for cash. This initiative is spearheaded by the Malaysia International Islamic Finance Centre.

Among the plantation signatories are Boustead Estate Agency Bhd, Genting Plantations Bhd, IOI Corp Bhd and Sime Darby Bhd. The financial institutions include Gulf Cooperation Council (GCC) banks Al Rajhi Banking & Investment Corp (M) Bhd, Asian Finance Bank Bhd, Kuwait Finance House (M) Bhd and Unicorn International Islamic Bank Malaysia Bhd. Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said “This venture brings two of the nation’s main global players; namely the Islamic banks and palm oil producers together, to further enhance Malaysia's palm oil futures' visibility on the world stage.”

Bursa Malaysia and CME Group, in 2009, announced plans for crude palm oil futures to be electronically traded on the CME Globex.^[11] CME Group will develop a US dollar-denominated, cash-settled contract using Bursa Malaysia settlements as its reference, at its Globex electronic platform in Chicago.^[12][13][14] CME Group will buy a 25% stake in Bursa Malaysia Derivatives for RM55.6 million to be satisfied in RM1.9 million cash and 76,427 shares of CME Group. To facilitate the proposed equity participation, Bursa will consolidate all its derivatives businesses into Bursa Malaysia Derivatives and its subsidiaries. Under the corporate exercise, Bursa Malaysia Derivatives will acquire the entire issued and paid-up share capital of Bursa Malaysia Derivatives Clearing Bhd from Bursa for a cash consideration of RM37.1 million. ^[15]

Operating round the clock, the CME Globex trading system is at the heart of CME. Proposed in 1987, it was introduced in 1992 as the first global electronic trading platform for futures contracts. This fully electronic trading system allows market participants to trade from booths at the exchange or while sitting in a home or office thousands of miles away. When Globex was first launched, it used Reuters' technology and network. September 1998 saw the launch of the second generation of Globex using a modified version of the NSC trading system, developed by Paris Bourse for the MATIF (now Euronext). To connect to CME Globex, traders connect via Market Data Protocol (MDP) and iLink 2.0 for order routing.

Jakarta Futures Exchange launched trading of physical crude palm oil (CPO) contracts in June 2009. Indonesia’s Deputy Minister of Agriculture and Fisheries at the Coordinating Ministry for the Economy, Bayu Krisnamurthi, had emphasised that a physical market must be established before futures trading can begin.^[16]

In October 2009, Indonesia plans to facilitate trading of crude palm oil and other raw materials on the Indonesia Commodity & Derivatives Exchange (ICDX).^[17] In spite of being the world’s largest producer, Indonesia has been unable to set a palm oil benchmark price, with trading centred in neighbouring Bursa Malaysia in Kuala Lumpur.

The Jakarta Futures Exchange, which was launched in 2000, started by offering crude palm oil and coffee futures but trading was “dormant” as operators have preferred to trade the palm oil contracts in Malaysia and coffee futures in London and New York, according to Edi Susmadi, a director of JFX. He attributed the failure to competition from Bursa Malaysia, and the low tech trading system. Max Ramajaya at Wilmar International, the world’s largest processor of palm oil, said: “When you trade on MDEX [Bursa Malaysia] you have better access to information about the market and more insight.

Back in June 2007, Singapore launched the Joint Asian Derivatives Exchange’s (JADE) US dollar-denominated CPO futures contract.^[18] JADE was a joint venture between the Chicago Board of Trade (now CME Group) and the Singapore Exchange (SGX). The aim was to provide a fair and transparent platform for price discovery in CPO and allow traders to buy JADE CPO futures and CBOT soyabean oil futures concurrently to manage their edible oils price risk.

However, the JADE CPO futures failed to sustain. CME Group, which acquired CBOT and inherited its investment in JADE, sold its 50% stake to SGX in late 2007.^[19] According to reports, both the rubber and CPO futures offered by JADE have failed to attract volumes. JADE merged with the Singapore Commodity Exchange in 2008.^[20]

See also

• Economy of Malaysia
• List of East Asian stock exchanges
• List of South Asian stock exchanges
• List of stock exchanges

References

External links

• Bursa Malaysia official website
• KLSE history page