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Plans to launch mercantile exchange in Malaysia

Publication Date : 19-07-2012


As part of new initiatives for the capital market, the Securities Commission (SC) of Malaysia will introduce a mercantile exchange to facilitate investments in gold futures and other precious metals, as well as a trading venue for unlisted firms to raise funds.

Prime Minister Najib Razak said yesterday that the SC would work towards developing these new segments and present the government with detailed recommendations for implementation.

Announcing this at the launch of the Private Pension Administrator and the Private Retirement Schemes (PRS), Najib noted that there was strong interest among Malaysians to look at additional asset classes for investment purposes.

"The government would like to ensure that such investments are done in a safer, transparent and structured environment," he said.

He also noted that there was strong interest from firms like small and medium enterprises (SMEs) to raise funds.

“This (new) trading venue, apart from providing financing opportunities, also enables investors to trade on an efficient and transparent platform,” he said.

Later at a press conference, SC chairman Ranjit Ajit Singh said both the mercantile exchange and the trading venue for unlisted companies would be launched within a year.

"We will have more details after we present a set of proposals to the government...But certainly ...they (the new segments) will be ready within a year," he said.

He concurred that there was currently “a lot of” appetite for the trading of precious metals such as gold going by the recent uptrend in prices.

“There will always be competition,” he said, referring to similar, already established mercantile exchanges in the region.

"However, that doesn't mean that we don't embark on it. Domestic demand is very strong."

Ranjit also explained that the trading venue for unlisted firms to raise funds would be done on an electronic platform.

“The aim here is to provide a matching facility' area where on one side, you have companies that want investors for capital, and on the other side, you have investors like private equity (PE) firms and venture capitalists who want to invest,” he said.

In this regard, companies would have access to capital, even prior to going public.

He noted similar trading venues had already been established in countries like Singapore and Britain.

Meanwhile, the Prime Minister also announced that two new categories of registered persons would be introduced by the SC to strengthen the role of dealers, facilitate the provision of specialised services and to access a greater client base.

Execution agents and business development representatives would be engaged by stockbroking companies to this end and the move is expected to increase the productivity of more than 6,000 licensed representatives as well as to create new jobs in the capital market.

Areca Capital chief executive officer Danny Wong lauded the moves by the government to promote the establishment of a trading venue for unlisted firms to raise funds, saying that it would provide the opportunity for firms to seek funds in a regulated and structured manner.

In turn, investors such as PE firms could also refer to the platform to seek and sift through products that could offer the best returns, the fund manager said.

Wong noted that the establishment of a mercantile exchange would address certain “grey areas” in local commodity trading.

“A structured platform will help investors avoid unregulated and unscrupulous investment schemes' that have increased in recent times,” he said.


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