asian markets: strategy for internationalisation presented by mohd ridzal sheriff head, group...

Asian Markets: Asian Markets: Strategy for InternationalisationStrategy for Internationalisation

Presented byMohd Ridzal Sheriff

Head, Group Business Development

10 August 2005

Bursa Malaysia Berhad and its Group of Companies (“the Company”) reserve all proprietary rights to the contents of this Presentation. No part of this Presentation may be used or reproduced in any form without the Company’s prior written permission. This Presentation is provided for information purposes only. Neither the Company nor the Presenter make any warranty, express or implied, nor assume any legal liability or responsibility for the accuracy, completeness or currency of the contents of this Presentation. It is your responsibility to verify any information before using or relying on it.

2FIA Aisia Derivatives ConferenceFIA Aisia Derivatives Conference

Incorporation of Malaysian Incorporation of Malaysian Derivatives Exchanges Derivatives Exchanges

Rationalisation of Malaysian Rationalisation of Malaysian Derivatives Market InstitutionsDerivatives Market Institutions

Bursa Malaysia: Transformation Bursa Malaysia: Transformation ProcessProcess

Bursa Malaysia: A Single ExchangeBursa Malaysia: A Single Exchange

Market StatisticsMarket Statistics

Malaysian Government PoliciesMalaysian Government Policies

Recent Developments in MalaysiaRecent Developments in Malaysia

Key Developments by Bursa MalaysiaKey Developments by Bursa Malaysia

ContentsContentsContentsContents


19801980Establishment of the Kuala Establishment of the Kuala

Lumpur Commodity Exchange (KLCE) Lumpur Commodity Exchange (KLCE) with CPO Futureswith CPO Futures

19951995The Kuala Lumpur Options and The Kuala Lumpur Options and Financial Futures Exchange (KLOFFE) Financial Futures Exchange (KLOFFE) was established and KLSE CI Futures was established and KLSE CI Futures contract was launchedcontract was launched

19961996Malaysia Monetary Exchange (MME) Malaysia Monetary Exchange (MME) was established and the 3 Month was established and the 3 Month KLIBOR Futures was launchedKLIBOR Futures was launched

Incorporation of Malaysian Derivatives Incorporation of Malaysian Derivatives ExchangesExchanges Incorporation of Malaysian Derivatives Incorporation of Malaysian Derivatives ExchangesExchanges


19981998

KLCE merged with MME to form KLCE merged with MME to form COMMEXCOMMEX

19991999

KLOFFE purchased by the Kuala KLOFFE purchased by the Kuala Lumpur Stock ExchangeLumpur Stock Exchange

June 2001June 2001

Incorporation of MDEX – Merger of Incorporation of MDEX – Merger of KLOFFE and COMMEXKLOFFE and COMMEX

Rationalisation of Malaysian Derivatives Rationalisation of Malaysian Derivatives Market Institutions (1)Market Institutions (1)Rationalisation of Malaysian Derivatives Rationalisation of Malaysian Derivatives Market Institutions (1)Market Institutions (1)


June 2002June 2002

Approval of the transfer of MDCH Approval of the transfer of MDCH from MDEX to Securities Clearing from MDEX to Securities Clearing Automated Network Services Automated Network Services (SCANS), a wholly owned subsidiary (SCANS), a wholly owned subsidiary of the Kuala Lumpur Stock Exchangeof the Kuala Lumpur Stock Exchange

August 2002August 2002

The sale of MDCH to SCANS was The sale of MDCH to SCANS was completedcompleted

Rationalisation of Malaysian Derivatives Rationalisation of Malaysian Derivatives Market Institutions (2)Market Institutions (2)Rationalisation of Malaysian Derivatives Rationalisation of Malaysian Derivatives Market Institutions (2)Market Institutions (2)


•Company limited by guarantee

•Operating stock exchange

(64 Member Companies)

•Company limited by shares

•Exchange holding company

Completed:

5 January 2004

• Company limited by shares

• Derivatives exchange

•Business Rules

100%

DemutualisationDemutualisation

Previous Previous StructureStructure

Previous Previous StructureStructure

Present StructurePresent Structure Present StructurePresent Structure

ListingListing

Listed:

18 March 2005

Bursa Malaysia Bursa Malaysia DerivativesDerivatives

Bursa Malaysia Bursa Malaysia DerivativesDerivatives

Bursa Malaysia: Transformation Bursa Malaysia: Transformation ProcessProcessBursa Malaysia: Transformation Bursa Malaysia: Transformation ProcessProcess


BURSA MALAYSIA BERHADBURSA MALAYSIA BERHAD

Equities MarketEquities Market

Main BoardSecond Board

Companieswith trackrecord

Main BoardSecond Board

Companieswith trackrecord

MESDAQMarket

Growth &TechnologyCompanies

MESDAQMarket

Growth &TechnologyCompanies

Bursa Malaysia Securities BhdBursa Malaysia Securities Bhd

Derivatives MarketDerivatives Market

Bursa Malaysia Derivatives BhdBursa Malaysia Derivatives Bhd

Offshore MarketOffshore Market

Labuan InternationalFinancial Exchange (LFX)

Labuan InternationalFinancial Exchange (LFX)

Clearing & DepositoryClearing & Depository

Citibank, Deutsche BankCitibank, Deutsche Bank

Integrated Clearing HouseIntegrated Clearing House

Bursa MalaysiaSecuritiesClearing

Bursa MalaysiaSecuritiesClearing

Bursa MalaysiaDerivatives

Clearing

Bursa MalaysiaDerivatives

Clearing

Common DepositoryCommon Depository

Bursa Malaysia DepositoryBursa Malaysia Depository

Bursa Malaysia: A Single ExchangeBursa Malaysia: A Single ExchangeBursa Malaysia: A Single ExchangeBursa Malaysia: A Single Exchange


Derivatives Products Listed on BursaDerivatives Products Listed on Bursa Derivatives Products Listed on BursaDerivatives Products Listed on Bursa

Bursa offers equity, financial and Bursa offers equity, financial and commodity derivatives for trading:commodity derivatives for trading:

Crude Palm Oil Futures (FCPO)Crude Palm Oil Futures (FCPO)

Crude Palm Kernel Oil Futures (FPKO)Crude Palm Kernel Oil Futures (FPKO)

Kuala Lumpur Composite Index Futures Kuala Lumpur Composite Index Futures (FKLI)(FKLI)

Kuala Lumpur Composite Index Options Kuala Lumpur Composite Index Options (OKLI)(OKLI)

3-Month Kuala Lumpur Interbank Offered 3-Month Kuala Lumpur Interbank Offered Rate Interest Rate Futures (FKB3)Rate Interest Rate Futures (FKB3)

Three-Year Malaysian Government Three-Year Malaysian Government Securities Futures (FMG3)Securities Futures (FMG3)

Five-Year Malaysian Government Five-Year Malaysian Government Securities Futures (FMG5)Securities Futures (FMG5)

Ten-Year Malaysian Government Ten-Year Malaysian Government Securities Futures (FMGA)Securities Futures (FMGA)


Annual Turnover & OI : 1995 – 2005 (May)Annual Turnover & OI : 1995 – 2005 (May)Annual Turnover & OI : 1995 – 2005 (May)Annual Turnover & OI : 1995 – 2005 (May)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Turn

ove

r

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Open p

osi

tion

Volume OP


Breakdown of Turnover (Jan – July 2005)Breakdown of Turnover (Jan – July 2005)Breakdown of Turnover (Jan – July 2005)Breakdown of Turnover (Jan – July 2005)

FKLI

52.98%

FMG5

0.88%

FCPO

41.75%

FKB3

4.16%

FMG3

0.23%

FKLI FMG5 FCPO FKB3 FMG3


0

20

40

60

80

100

120

140

160

180

200

Jan

-96

Jun

-96

No

v-9

6

Ap

r-9

7

Se

p-9

7

Fe

b-9

8

Jul-9

8

De

c-9

8

Ma

y-9

9

Oct

-99

Ma

r-0

0

Au

g-0

0

Jan

-01

Jun

-01

No

v-0

1

Ap

r-0

2

Se

p-0

2

Fe

b-0

3

Jul-0

3

De

c-0

3

Ma

y-0

4

Oct

-04

Ma

r-0

5

Volu

me

(‘000

)

0

4

8

12

16

20

24

28

32

36

40

Ope

n Po

sitio

n(‘0

00)

Volume Open Position

Note: Migration to Electronic Trading on 29 December 2001

FCPO Volume & OIFCPO Volume & OI FCPO Volume & OIFCPO Volume & OI


Record Monthly Volume : 177,319 contracts (October 2003)Record Daily Volume : 14,508 contracts (21 October 2003)

Record Daily Open Interest : 37,887 contracts (27 September 2004)

Breakdown of FCPO Market Breakdown of FCPO Market Participation Participation (Jan – July 2005)(Jan – July 2005)

Breakdown of FCPO Market Breakdown of FCPO Market Participation Participation (Jan – July 2005)(Jan – July 2005)

33002

43441

4440

34180

5701560

0 10,000 20,000 30,000 40,000 50,000 60,000

No. of contracts

Foreign Institution

Local Institution

Foreign Retail

Local Retail

Locals

Proprietary

Part

icip

ants

(<1%)

(33.12%)

(19.86%)

(2.58%)

(25.24%)

(19.17%)


FKLI Volume & OIFKLI Volume & OI FKLI Volume & OIFKLI Volume & OI

Figure 1. KLCI Futures

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000110,000120,000130,000140,000

Dec-9

5Ma

y-96

Oct-9

6Ma

r-97

Aug-

97Ja

n-98

Jun-

98No

v-98

Apr-9

9Se

p-99

Feb-

00Ju

l-00

Dec-0

0Ma

y-01

Oct-0

1Ma

r-02

Aug-

02Ja

n-03

Jun-

03No

v-03

Apr-0

4Se

p-04

Feb-

05

Volu

me

0

2,000

4,0006,000

8,000

10,000

12,000

14,00016,000

18,000

20,000

Ope

n Po

sitio

n

Volume Open Position

Note: FKLI was downsized on 19 September 2003


Record Monthly Volume

Record Daily Volume

Record Daily Open Interest

Breakdown of FKLI Market Breakdown of FKLI Market Participation Participation (Jan – July 2005)(Jan – July 2005)

Breakdown of FKLI Market Breakdown of FKLI Market Participation Participation (Jan – July 2005)(Jan – July 2005)

: 136,870 contracts (May 2004)

: 16,169 contracts (26 July 2005)

: 33,243 contracts (26 June 1998)

73779

8283

1099

2823

9439037974

112

0 20,000 40,000 60,000 80,000 100,000

No. of contracts

Foreign Institution

Local Institution

Local Corporation

Foreign Retail

Local Retail

Locals

ProprietaryPa

rtic

ipan

ts(<1%)

(17.38%)

(43.21%)

(1.29%)

(<1%)

(3.79%)

(33.77%)


Malaysian Government PoliciesMalaysian Government PoliciesMalaysian Government PoliciesMalaysian Government Policies

Overall aim to push forward and enhance Overall aim to push forward and enhance Malaysia’s competitive standing Malaysia’s competitive standing regionally and internationallyregionally and internationally

Move towards becoming a supportive Move towards becoming a supportive and effective enabler of business, by and effective enabler of business, by putting in place conducive conditions putting in place conducive conditions and creating opportunities for the and creating opportunities for the private sector to thrive private sector to thrive

Reform of government-linked companies Reform of government-linked companies (GLCs) with the aim to make them more (GLCs) with the aim to make them more performance-driven, efficiently-managed, performance-driven, efficiently-managed, commercially-focused and customer-orientedcommercially-focused and customer-oriented

Develop a strong and vibrant domestic Develop a strong and vibrant domestic capital market as a key enabler in securing capital market as a key enabler in securing healthy longterm economic growth of the healthy longterm economic growth of the country country

Move forward with deregulation and Move forward with deregulation and liberalisationliberalisation

Transforming the services sectorTransforming the services sector


Liberalisation of the Capital MarketLiberalisation of the Capital MarketLiberalisation of the Capital MarketLiberalisation of the Capital Market

The following measures were The following measures were announced by the Malaysian announced by the Malaysian Government in September 2004, and Government in September 2004, and incorporated in the 2005 Budget:incorporated in the 2005 Budget:

100% foreign ownership in 100% foreign ownership in futures broking industryfutures broking industry

Issuance of up to 5 new licences Issuance of up to 5 new licences to foreign stockbrokersto foreign stockbrokers

Issuance of up to 5 new licences Issuance of up to 5 new licences to foreign fund managersto foreign fund managers

No restrictions on the number of No restrictions on the number of foreign dealer representativesforeign dealer representatives


Liberalisation of Capital ControlsLiberalisation of Capital ControlsLiberalisation of Capital ControlsLiberalisation of Capital Controls

Bank Negara Malaysia (BNM) Bank Negara Malaysia (BNM) announced further relaxations of the announced further relaxations of the foreign exchange administration foreign exchange administration rules with effect from 1 April 2005. rules with effect from 1 April 2005. These include increased flexibility for These include increased flexibility for residents to investment aboard, residents to investment aboard, extension of credit flexibilities to extension of credit flexibilities to non-residents, and facilitation of non-residents, and facilitation of better and more efficient risk better and more efficient risk management of currency exposure management of currency exposure for both residents and non-residents.for both residents and non-residents.

These measures are part of BNM’s These measures are part of BNM’s continuous effort to further enhance continuous effort to further enhance the business environment, increase the business environment, increase efficiency of the regulatory delivery efficiency of the regulatory delivery system and promote wider risk system and promote wider risk management options. management options.


De-peg of the RinggitDe-peg of the RinggitDe-peg of the RinggitDe-peg of the Ringgit

BNM announced on 21 July 2005 that BNM announced on 21 July 2005 that the exchange rate of the Ringgit will the exchange rate of the Ringgit will be allowed to operate in a managed be allowed to operate in a managed float, with its value being determined float, with its value being determined by economic fundamentals. by economic fundamentals.

BNM will monitor the exchange rate BNM will monitor the exchange rate against a currency basket to ensure against a currency basket to ensure that the exchange rate remains close that the exchange rate remains close to its fair value. to its fair value.


Key Developments by Bursa Key Developments by Bursa MalaysiaMalaysiaKey Developments by Bursa Key Developments by Bursa MalaysiaMalaysia

Introduction of more products• Single Stock Futures (SSF)

Ensuring market integrity• Size of Clearing fund increased on 1 April 2005

Lodging of shares as margin collateral (wef January 2005)

• 50 stocks accepted as collateral by Clearing House.

Regulatory Review• Amendment to Business Rules - allow opening of omnibus a/cEducation, Marketing & Promotions•Investor roadshows and conferences i.e. Invest Malaysia 2005, Palm & Lauric Oils Conference & Exhibition

Common Trading Platform•Implementation of new derivatives trading system by Q3 2005•Open API and facilitates Direct Market Access


Q & AQ & A


Derivatives MarketingDerivatives MarketingBursa Malaysia BhdBursa Malaysia Bhd

1010thth Floor, Exchange Square Floor, Exchange Square Bukit KewanganBukit Kewangan

www.bursamalaysia.comwww.bursamalaysia.com

[email protected]@bursamalaysia.com

+ 603 2034 7188+ 603 2034 7188

asian markets: strategy for internationalisation presented by mohd ridzal sheriff head, group...

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