with Dato’ Yusli bin Mohamed Yusoff, CEO, Bursa Malaysia
Malaysia was among the hardest hit by the last economic crisis within South East Asia, but nevertheless entered recession later than other East Asian economies. What were the factors behind this duplicity of results and how has the investor’s community in Malaysia reacted to both trends?
The Malaysian market has unique selling propositions that are appealing to a wide spectrum of investors who prefer defensive investments. The key attraction of the Malaysian market is it is defensive, or “safe haven” as acknowledged by foreign investors and fund managers. Many investors have benefited from this low-beta market as we provide safe investment opportunities in resilient sectors and Shari’ah compliant funds in comparison to developed markets in the region. The strong fundamentals of the country only further reinforced the growth potential of the Malaysian capital market which has bounced back fairly well after the economic downturn.
Suffice to say that the Malaysian economy, given its high degree of openness, was also affected by the global recession, just like its neighbouring economies. Nevertheless, Malaysia’s sound economic fundamentals, strong financial system and the implementation of comprehensive policy support measures had prevented the economy from slipping into a severe and prolonged period of negative growth.
Investor confidence in the global equities market returned in March 2009 on account of rising optimism that the global economy contraction has passed its worst. This was similar for Malaysia, where in 2008 the key benchmark FBM KLCI fell almost 40% but it still managed to outperform most of its regional peers. The combination of the subprime mortgage loans failure, global financial and credit crunch crisis as well as deepening global economic recession roiled stock markets worldwide and shattered investor confidence – Malaysia was no exception. However, Bursa Malaysia had a strong rebound in 2009, which was in line with the global equity market recovery. The FBM KLCI recouped its losses made in 2008 when it chalked an impressive gain of 45% in 2009. In essence, the market has been picking up relatively well, indicating that it remains vibrant and competitive.
So far, Q1 2010 looks promising for the Exchange of which the equities market trading is buoyant and performed better than Q1 of 2009. This is coupled with progressive measures by Government such as divestment of Government’s stakes in listed companies in order to boost market liquidity. Market sentiment has also improved in which the retail investors are slowly returning to our market and this is certainly a positive development.
Since its first listing in August 2009, Bursa Malaysia has emerged as the top listings exchange in the world for sukuk. By the end of December 2009, the value of sukuk program listings totaled $17.6 billion, comprising a total of 12 sukuk issuances, hence surpassing its main rival Nasdaq Dubai ($15.7 billion). What has been your strategy to lead to such a success, how are you positioning Bursa Malaysia on the international Islamic finance scene and what is your approach to become the preferred Sukuk issuer?
Our country has developed a competitive advantage in the Islamic market as a result of its established and complete market infrastructure plus a well-regulated, recognised Shari’ah framework. We are leveraging on this existing infrastructure to introduce facilitative framework, products and services to accommodate issuers’ and investors’ demands. We are also widening our reach to other markets in support of the MIFC’s initiative in facilitating Malaysia’s aim as an Islamic financial hub. In addition, we are on a quest to position Bursa Malaysia as a global platform for issuers worldwide to issue Islamic papers to raise funds.
To that end, the achievement of us topping the world’s exchanges in terms of value of Sukuk listings in 2009 is reflective of Malaysia’s significance in the world of Islamic capital markets. In addition, this positive response by market participants demonstrate their confidence in the Malaysian Islamic capital market which boasts high level of governance and transparency. To ensure that, our infrastructure and products are in compliance with the international regulatory framework namely IOSCO, AAOIFI, IFSB and IIFM.
PETRONAS issued $1.5 billion of Sukuk in 2009, and is looking at listing two of its subsidiaries – PETRONAS Petrochemical & MMHE – this year. How receptive are investors to PETRONAS’ capital raising, and what impact has this crucial player on the local and regional financial markets?
According to the Lead Arranger of the issuance of PETRONAS Global Sukuk, almost 50% of the tranche was distributed to the rest of Asia and 40% was disseminated to the rest of the world. PETRONAS Sukuk was oversubscribed by 4 times since its issuance. The listing of PETRONAS Sukuk was due to the major investment managers, who required listing as pre-requisite for investment decision thus allowing PETRONAS to obtain approval prior to its distribution.
From the global perspective, the awareness among the issuers is growing after the initial Sukuk listing spurred by PETRONAS, given the pricing competitiveness that the Malaysian market could offer in contrast to GCC and European markets. The Government has also identified the Q&G industry as the National Key Economic Activity driver, which certainly boosts Bursa Malaysia’s status in offering an attractive platform to raise capital/funds and enhancing foreign attention to the Malaysian market.
Bursa Malaysia is the stock exchange chosen by oil & gas related companies such as Dialog, Kencana, KNM, Wah Seong, Sapura Crest or Dayang. How would you rate the attractiveness of Bursa Malaysia – and Malaysia in general – to Oil & Gas companies and investors compared to other players such as Singapore Exchange, Dubai Nasdaq, Toronto Stock Exchange, New York SE or London SE?
Malaysia is blessed with a wealth of natural resources such as O&G. Thus, by virtue of this strength, it is one of our niche industries which has healthy growth rates. Close to 30 O&G related companies are listed on Bursa Malaysia compared to our closest neighbour.
Our O&G companies command attractive valuations compared to other markets and this, I believe, offer investors quality investments and strong returns. We can certainly compete on the global scale. Malaysia offers a comprehensive range of O&G subsectors – from exploration and production; refining and marketing (e.g. Petronas Dagangan, Shell); equipments and services (e.g. Tanjong Offshore, Wah Seong); as well as storage and transportation (e.g. Alam Maritim, Dayang). We also have dedicated O&G research analysts with strong industry knowledge to provide better valuations.
What could you tell to our international readers on the investment climate within the oil & gas industry in Malaysia: how dynamic are the IPOs and M&A activities and what are the most promising investment trends to follow?
As you are already aware, Dato’ Seri Najib Tun Razak, Malaysia’s Prime Minister’s recently announced at the Invest Malaysia conference in March 2010 that two subsidiaries of Petronas will be listed this year – Malaysia Marine and Heavy Engineering Sdn Bhd and Petronas’ Petrochemical business. These upcoming listings will add to the variety of stock pickings available in the Malaysian O&G industry, provided that they offer high free float of shares to ensure market liquidity for these companies.
On M&A activities among Malaysian O&G related companies, it will be great to create bigger entities in our market to move up the value chain, so that we can be more competitive with other larger O&G companies listed on matured exchanges. Currently, there are two listed O&G companies that are constituents of our FBMKLCI namely Petronas Dagangan and Petronas Gas. We hope to attract more large O&G players into our market, and definitely encourage more merging of O&G companies in the near future. While the quality of a company is an essential criteria, size also does matter in this particular industry.
You have had a fast track career that started abroad but you decided to come back to Malaysia. You have headed Bursa Malaysia since 2004, managed it through tough times and have been re-appointed for two years. What lessons have you learnt that helped you tackle challenges when managing Bursa Malaysia?
Being CEO of the Exchange is akin to being in the hot seat. My role is to ensure that the Exchange keeps constantly on par with the changing landscape of the trading environment as well as investors’ needs. I am responsible to institute change when required, ensure that market trades in a fair and orderly manner, and more importantly, ensure investor protection remains uncompromised.
For instance, when things slowed down during the economic downturn, Bursa Malaysia was in good shape due to our prudent cost management efforts. All this cannot be done without the help and support of the Bursa Malaysia team. Getting buy in from all is vital; it is not just from the Board but also from shareholders, stakeholders and colleagues. Then, there is greater motivation to get things done and get it done right. A company is only as good as its people.
While we may look at the past as a basis for future decisions, it is the future that counts and all our efforts are guided towards ensuring that the future remains viable and bright.