Kuala Lumpur Stock Exchange (KLS)

The Kuala Lumpur Stock Exchange (KLSE), now known as Bursa Malaysia, is the primary stock exchange in Malaysia. Located in the country’s capital, Kuala Lumpur, it plays a vital role in the Malaysian financial market, facilitating the trading of various financial instruments including equities, derivatives, and bonds. Established to promote a transparent, efficient, and orderly market for trading securities, Bursa Malaysia has grown into a significant hub for financial activities in Southeast Asia.

History and Evolution

The Kuala Lumpur Stock Exchange was established in 1930 under the name Singapore Stockbrokers’ Association. Initially, it was an informal exchange trading in stocks and shares. The association evolved into the Malayan Stock Exchange in 1960 and then into the Stock Exchange of Malaysia in 1964. Following Malaysia’s separation from Singapore, the Kuala Lumpur Stock Exchange was formed in 1973 and commenced operations in 1976. In 2004, it was renamed Bursa Malaysia to reflect a more integrated and comprehensive marketplace.

Structure and Organization

Bursa Malaysia consists of several components:

  1. Main Market: The Main Market is where large-cap companies list their shares. It includes a wide range of industries such as banking, technology, and manufacturing.

  2. ACE Market: This market is designed for growth companies, allowing them to raise funds to support expansions and innovations. The ACE Market generally caters to small and medium-sized enterprises (SMEs).

  3. LEAP Market: Aimed at sophisticated investors, the LEAP (Leading Entrepreneur Accelerator Platform) Market provides a more accessible route for companies looking to list, with reduced regulatory requirements.

  4. Derivatives Market: This segment facilitates the trading of financial derivatives, including futures and options.

Key Indices

Bursa Malaysia uses several indices to represent different segments of the market:

  1. FTSE Bursa Malaysia KLCI (Kuala Lumpur Composite Index): The most recognized index, comprising the 30 largest companies by market capitalization. It serves as a benchmark for the Malaysian market.

  2. FTSE Bursa Malaysia Hijrah Shariah Index: This index includes Shariah-compliant companies, catering to ethical and religious investors.

  3. FTSE Bursa Malaysia Mid 70 Index: Includes 70 mid-cap companies, offering a snapshot of the mid-tier market.

Trading Mechanisms

Bursa Malaysia supports multiple trading mechanisms to facilitate the efficient buying and selling of securities:

  1. Continuous Trading: Most trades occur continuously during the trading session. Orders are matched in real-time based on price and time priority.

  2. Opening and Closing Auctions: These auctions determine the opening and closing prices of securities. They aggregate all buy and sell orders before the market opens and closes to establish a single equilibrium price.

  3. Off-Market Trades: Allow large transactions to be executed without impacting the market price. These trades are typically negotiated privately between parties and then reported to the exchange.

Regulatory Framework

Bursa Malaysia is regulated by the Securities Commission Malaysia (SC), which oversees the registration of market participants, ensuring they adhere to stringent rules and regulations. The SC enforces compliance with laws designed to protect investors and ensure market integrity. This regulatory framework covers aspects such as corporate governance, disclosure requirements, and trading practices.

Technological Initiatives

Bursa Malaysia has been investing in advanced technologies to enhance trading efficiency and security:

  1. Automated Trading System (ATS): This platform automates the matching of buy and sell orders, ensuring timely and accurate execution of trades.

  2. Electronic Clearing System (ECS): Reduces settlement risk by automating the clearing and settlement process.

  3. Bursa Anywhere: A mobile app providing investors with secure access to their investment portfolios, transaction history, and market information.

Listing Requirements

Companies looking to list on Bursa Malaysia must meet specific requirements, which vary depending on the market (Main, ACE, or LEAP). Key criteria include:

  1. Financial Performance: Companies must demonstrate adequate financial performance with minimum profit or revenue thresholds.

  2. Public Shareholding Spread: Listed companies must ensure a certain percentage of shares are held by the public to ensure liquidity and prevent market manipulation.

  3. Corporate Governance: Compliance with corporate governance standards, including board composition and disclosures, is mandatory.

Market Participants

Several types of participants operate in Bursa Malaysia:

  1. Investors: Both individual and institutional investors participate in buying and selling securities. Institutional investors include mutual funds, pension funds, and insurance companies.

  2. Issuers: Companies that issue shares to be traded on the exchange. They may also issue bonds and other debt instruments.

  3. Brokers and Dealers: Facilitate transactions between buyers and sellers. Brokers act on behalf of clients, while dealers trade for their accounts.

  4. Market Makers: Provide liquidity by continuously offering to buy and sell specific securities at quoted prices.

Corporate Social Responsibility (CSR)

Bursa Malaysia promotes sustainable and responsible investing. It has initiatives encouraging companies to adopt CSR practices and disclose their environmental, social, and governance (ESG) performance. The FTSE4Good Bursa Malaysia Index was launched to highlight companies with strong ESG practices.

Global Connections

Bursa Malaysia has established strategic partnerships with other global exchanges to enhance its international presence. These collaborations include cross-border trading platforms and dual listings, enabling Malaysian companies to access foreign capital markets and investors to diversify their portfolios.

Future Prospects

Bursa Malaysia continues to evolve with the global financial landscape. Future initiatives focus on:

  1. Digital Innovations: Embracing technologies like blockchain and artificial intelligence to enhance transparency, security, and efficiency.

  2. Sustainable Finance: Expanding offerings in green bonds and other sustainable financial products.

  3. Financial Literacy: Increasing investor education to foster a more informed and resilient investor base.

Conclusion

Bursa Malaysia plays a critical role in Malaysia’s financial ecosystem, supporting economic growth and development. Its robust infrastructure, regulatory framework, and commitment to innovation and sustainability make it a cornerstone of the regional financial market.

Website for further details: Bursa Malaysia