Bourse directive seen as dampener to market

Bourse directive seen as dampener to market

KUALA LUMPUR (AFP): A new directive by Malaysia's stock exchange for brokers to report transactions daily has dented the market this week but could enhance investor confidence in the local bourse in the long-term, analysts said yesterday.

The directive, issued internally to brokerages on Monday for implementation next week, is aimed at controlling excessive speculation and preventing stockists from rigging the market, brokers said.

Stockists, who are dealers trading on behalf of stockbroking firms, have been known to manipulate the volatile Kuala Lumpur bourse by sheer volume, reputedly adding up to 30 percent to the true volume of a counter.

The Securities Commission identified these activities as "an area for concern" during the super bull-run of 1993.

But analysts said the order had indirectly depressed market activities since Monday.

"This is one of the factors why the market dropped in the last few days. People are not quite sure what this directive is all about," said a dealer from a local stockbrokerage.

The Kuala Lumpur Stock Exchange (KLSE)'s composite index, which tracks 86 blue chips, fell on Monday and Tuesday before plunging 27.12 points on Thursday. The bourse was closed on Wednesday for the Hindu festival of Diwali.

The formatted reports on intra-day transactions are to include the counters concerned, contract numbers, trading room slip numbers, quantities and unit prices, a broker said.

They must also include the amount of brokerage, stamp duty, clearing fee and net amount payable and receivable.

Stockbrokerage firms were previously only required to report transactions on a weekly basis.

"This is very restrictive. It's very common for people to use their clearing accounts to trade in and out of stocks," the broker said.

But analysts said the market would benefit in the long run.

"Any measure that is going to enhance the credibility and transparency of the KLSE can only be good for the market," said Alexander Sequerah, head of sales of Leong and Co stockbrokerage.