Malaysia's high-tech board to begin trading Friday
By Julian Matthews
Thursday, April 29 1999
KUALA LUMPUR--Malaysia's latest stock exchange, modelled after the Nasdaq Stock Exchange, will begin trading its first counter Friday.
The Malaysian Exchange of Securities Dealing and Automated Quotation (Mesdaq), will make its debut with just one company, little-known wire and cable-maker Supercomal Technologies Bhd.
Analysts say interest in the exchange is expected to be lukewarm. The say the exchange is likely to attract smaller funds and individuals rather than the major players.
The research head of a securities firm said the exchange was unlikely to pick up steam in the near-term because recent initial public offerings (IPOs) on Malaysia's main bourse, the Kuala Lumpur Stock Exchange (KLSE), have been dismal.
"There is also fear among buyers that technology stocks are high risk. The more sophisticated investors will quickly ascertain whether companies are truly innovative. Unless companies with proven award-winning inventions list on the
exchange, I don't expect it to take off," she said.
Mesdaq executive chairman Khairil Anuar Abdullah is optimistic, however, that the exchange will build momentum over time. "We hope it will be the exchange of choice both for technology companies in Malaysia as well as those in the
Pioneer company Supercomal Technologies said it chose to list on Mesdaq, despite qualifying for the KLSE, because it wanted to attract the type of investors who are long-term
players, interested in the high-tech cables industry and understand high-growth technology markets.
The company is based in Sungei Petani, in the northern state of Kedah. It is issuing 3.05 million ordinary shares at a price of 3.20 ringgit (84 cents) each, on Friday. The 9.76 million ringgit it hopes to raise will allow it to start making CAT 5 data communication cables for regional markets by the last quarter of 1999.
Over 2,000 copies of the company's prospectus were downloaded from Mesdaq's Web site, indicating buyer interest, says Khairil.
The launch comes in the wake of an upsurge in the KLSE and indications of a recovery of the nation's battered economy.
Credit rating agencies Moody's Investors Service, and Standard and Poor's recently upgraded Malaysia from "negative'" to "stable", and the central bank, Bank Negara Malaysia, forecasts that the economy will grow by at least 1 percent this year after shrinking 6.7 percent last year, its first recession in 13 years.
The KLSE sunk to all-time lows last year after Prime Minister Mahathir Mohamad blamed "rogue currency speculators" for the economy's collapse and introduced
radical capital controls which pegged the ringgit at 3.80 to one US dollar, made the currency non-tradeable abroad, and locked in investments for one year.
A key draw for the new exchange is exemption of capital control measures imposed last September when Malaysia placed a one-year embargo, and later an exit levy, on repatriation of profits from share-trading.
Mesdaq also allows 100 percent foreign-owned companies to list, which it hopes will attract multinationals already on Nasdaq or other international boards, to seek a secondary listing here.
On whether there was enough liquidity to support the market, Khairil said building liquidity for small cap stocks was a challenge anywhere.
"Mesdaq will be the first stock exchange in the region to have competitive market-making for trading of equities, similar to the Nasdaq. This will result in lower price volatilities, and greater liquidity over time," he said.
Khairil expects Mesdaq to spur the development of venture capital and private equity funds, and improve research of technology stocks by broking houses as the
market gathers steam.
First announced in October 1997, Mesdaq was aimed at high-tech companies with strong growth potential but with no track record of profits.
The exchange was to complement Malaysia's Multimedia Super Corridor (MSC) project, a 750 sq km zone, south of capital city Kuala Lumpur, being built from scratch into a global multimedia hub.
Start-ups involved in the project planned to raise much-needed funding from Mesdaq. But the high-tech corridor's infrastructure build-up and flagship
applications were beset with delays last year. Various companies associated with the project floundered and interest in Mesdaq waned.
It is understood Mesdaq's trading system has been ready since last July, but the companies were not prepared to list.
At least four other companies are expected to list on Mesdaq this year, which may include companies involved in contract manufacturing, healthcare, software development and set-top boxes.