Bursa Malaysia plays a critical role as a catalyst of growth for the
Malaysian capital market. As at 31 December 2012, we had 921 Public
Listed Companies (PLCs) on our Exchange, with a market capitalisation
of RM1.47 trillion. As an exchange, our partners include investment
banks/brokers, PLCs and institutional and retail investors. We believe in
facilitating the needs of each stakeholder group to the best of our ability
by creating a conducive ecosystem as we strive to amplify our presence
in the ASEAN marketplace.
One of the most pertinent challenges facing all exchanges, including
Bursa Malaysia, is the fast-changing landscape. Over the years, the
market has become increasingly open along with liberalisation and
online trading. This affords greater choice to investors and issuers, while
increasing competition among exchanges. Within the ASEAN region, we
are presented with opportunities upon implementation of various aspects
of the ASEAN Economic Community (AEC) in 2015 which will entail freer
flow of capital across all member countries while opening up doors to
In order to grab opportunities of tomorrow, Bursa Malaysia has for the last
few years focused on strengthening its fundamentals. In 2012, we refined
our strategy with the formulation of four Strategic Intents which outline
a clear pathway leading to the realisation of our vision of becoming a
leading ASEAN marketplace. These Strategic Intents are:
- To create a more facilitative trading environment
- To facilitate more tradable alternatives
- To reshape the market structure and framework
- To be the regional marketplace with global access
Strategic Intent No. 1 involves rethinking our market management
approach, and introducing new systems driven by technological advances
to allow for greater ease and efficiency of trading activity. This will help
to create a robust, facilitative and vibrant marketplace for all types of
traders and investors.
Strategic Intent No. 2 entails building a diverse profile of ample and
sustainable tradable alternatives across the various asset classes in
order to become an attractive fund raising and investment destination.
In making Bursa Malaysia an attractive investment destination, Strategic
Intent No. 3 will enable the Exchange to compete regionally by reshaping
the market structure and framework in order to reduce friction and
to be competitive especially within ASEAN. It involves improving the
delivery system by encouraging greater participation of traders and
other intermediaries, and providing better support systems to ensure
compliance with best governance practices.
In pursuit of the 4th strategic intent, Bursa Malaysia is capitalising on
ASEAN's growth opportunities and its niche in Islamic capital markets
to establish itself as a regional marketplace with global access and
connectivity. The first key milestone was achieved with the ASEAN
Trading Link, a growth catalyst spurred by direct cross-border trading
between Malaysia, Singapore and Thailand.
2012 saw Bursa Malaysia report a 4% increase in profit after tax and
minority intrest (PATAMI) from RM146.2 million in 2011 to RM151.5 million,
on the back of a 2% increase in operating revenue. Despite continued
global uncertainties and market volatility, the local economy remained
strong, boosted by the Government Transformation Programme and
Economic Transformation Programme. Notably, 2012 saw Malaysia in the
global spotlight with sucessful mega IPOs of Felda Global Ventures Holdings
Berhad, IHH Healthcare Berhad and Astro Malaysia Holdings Berhad. This
played an important role in our financial performance in 2012.
Our cost to income ratio, meanwhile, reduced by 2 percentage points to
49%, while our return on equity held steady at 17%.
|Profit Before Tax
|Income Tax Expense
|Profit After Tax
|Cost to Income Ratio
|Return on Equity
The increased net profit and improvement in our cost to income ratio
were largely due to growth in revenue from income streams other than
securities trading and a marginal contraction in costs.
Our operating revenue grew from RM381.5 million in 2011 to RM388.5
million in 2012, mainly as a result of an increase in revenue from the
derivatives market as well as stable income. The latter was boosted
by the listings of the three mega IPOs, higher number of structured
warrants listings and increase in sales of information. These more
than compensated for the drop in revenue from securities trading from
RM193.0 million to RM178.3 million due global uncertainties which cast
a shadow over investor sentiment.
Contraction in cost
Operating expenses reduced marginally by 1% to RM211.1 million in
2012, as a result of a lower headcount and depreciation.
Our higher PATAMI allows us to propose a higher dividend for 2012. A final
dividend of 13.5 sen will be recommended for shareholders' approval at
our Annual General Meeting on 28 March 2013. If approved, this will bring
our total dividend for the year to 27 sen, representing a payout ratio of
95% which is consistent with our yearly offering, surpassing our 75%
Improvement in profits of business segments
Our key market segments improved during the year while other
businesses saw positive trajectory with a significant reduction in losses.
|% Change in
|Segment Profit from:
|Total Segment Profit
Securities market supported by mega IPOs, structured warrants and
The reduction in cost compensated for the lower trading revenue
resulting in 2% increase in profit in the securities market from RM220.9
million to RM225.6 million in 2012. Operating revenue generated by the
securities market amounted to RM295.9 million, a 1% reduction from
RM298.5 million in 2011.
Trading revenue reduced by RM14.7 million to RM178.3 million in 2012,
as investor sentiment was affected by the continued global economic
uncertainties. Though retail players and foreign investors were more
cautious, this was mitigated by support from domestic institutions.
The highlight of our securities market in 2012 was the listing of the three
mega IPOs, which raised an aggregate fund size of RM20.8 billion. These
three IPOs contributed to approximately RM10 million in trading and
During the year, we saw an increased appetite for structured warrants.
This contributed to a 52% increase in the number of structured warrants
issued to 551 and a corresponding increase in the listing fees.
The review of the market data fee structure in 2012 and a greater level
of subscription to the direct market access which we introduced in 2011
also helped to mitigate the effects of the drop in trading revenue.
Direct costs in the securities market decreased by 10% from RM92.7
million to RM83.1 million, mainly due to a lower headcount and
Derivatives market supported by growing interest in CPO futures
The derivatives market saw a 13% increase in profit from RM37 million
in 2011 to RM41.9 million in 2012, mainly due to higher trading volumes.
Operating revenue increased by 11% from RM69 million to RM76.6
Trading revenue increased by 9% to RM56 million in 2012 from RM51.2
million in 2011, largely due to increase in interest in our key product, CPO
futures contract. Volume of CPO futures contracts grew by 27% on the
back of continuous CPO price volatility resulting in a greater use of CPO
as a hedging tool, and improved participation from foreign institutions.
The global visibility accorded by the Globex trading platform served to
improve foreign participation from 31% in 2011 to 36% in 2012.
The review of the market data fee structure in 2012 and a higher
subscription for derivatives data also contributed to the increase in
revenue to the derivatives market.
Direct costs in the derivatives market increased by 5% from RM35.5
million in 2011 to RM37.2 million in 2012 as a result of higher volume
related fees charged for trades conducted on the Globex trading platform.
Exchange holding company
The exchange holding company reported a decline in profit by 23% from
RM11.7 million in 2011 to RM9 million in 2012 due to higher one-off
Losses in other businesses reduced by improving trade on BSAS
Other businesses segment comprises the operations of a Shari'ah
compliant commodity trading platform (BSAS), an electronic bond trading
platform and an offshore exchange (LFX). Operating loss was halved from
RM8.7 million in 2011 to RM4.0 million in 2012 due to lower losses from
the business within this segment. BSAS recorded significant growth in
operations largely due to growing global acceptance of it being a platform
for Murabahah sukuk issuance. This was evidenced by an 89% growth in
daily average value traded on BSAS from RM1.2 billion in 2011 to RM2.3
billion in 2012. At the same time, domestic and foreign participation
grew by 61% and 193% respectively. The lower losses recorded by the
operations of electronic bond trading platform and LFX were due to lower
cost incurred and marginal increase in revenue.
During the year, we focused on creating a more facilitative ecosystem
in the securities market by introducing a number of technological
improvements, while also launching new products and stimulating
interest via an active investor engagement programme. Although there
was a drop in new listings, the value of the IPOs made up for their small
number. We also recorded increase number of fundraising exercises in
the secondary market and more new structured warrants were listed.
Among the technological enhancements we invested in was Central
Depository System (CDS)-Straight Through Processing, which was
implemented in three phases. The first phase, launched on 18 June
2012, allows participants to receive regular updates of their clients'
CDS account balances. The second phase, launched on 13 August 2012,
provides intraday updates on clients' shareholding positions. Phase three,
implemented on 15 October 2012, allows subscribing participants to
automate their daily data entry of transactions into the CDS, minimising
manual data entry and facilitating faster data capturing.
We followed up on the enhanced CDS to provide share registrars and
listed issuers with greater access to Records of Depositors (RODs) online.
Share registrars/listed issuers can now access RODs backdated to seven
years, check the status of Corporate Action ROD online, and request for
RODs for future dates. Further speeding up corporate actions, the CDS
can now send electronic notifications to share registrars or issuing houses
on allotment verification results, while share registrars can submit bulk
transfer requests via eRapid, as opposed to through magnetic media.
Finally, trustees can request for the creation or redemption of exchange
traded fund (ETF) units for multiple Participant Dealers currently.
To further enhance straight-through processing, in July 2012, we
introduced an enhanced Central Matching Facility (CMF) for the
Clearing House, which offers end-to-end electronic matching of trade
and settlement details between trading clearing participants and non-trading
clearing participants, who are also the clearing participants of the
Clearing House. The CMF has a greater capacity to handle pre-matched
transactions while minimising settlement risks and errors.
To facilitate the selling of loaned securities by a lender before recalling
from the borrower, the Scheduled Delivery Time and Scheduled
Settlement Time for recalled securities were modified in connection
with the introduction of the Capital Markets and Services (Securities
Borrowing and Lending) Regulations 2012. Consequently, the Securities
Borrowing and Lending Central Lending Agency (SBL-CLA) and Securities
Borrowing and Lending Negotiated Transaction (SBL-NT) were enhanced.
These enhancements were completed by March 2012.
Meanwhile, the eCash Payments Framework was extended following
the success of the electronic dividend payment system, which now
accounts for 81% of total dividend payments, up from 77% in 2011. As
of 3 September 2012, electronic payment has been made available for
other forms of cash payments to securities holders such as interest or
profit rates on debt securities or sukuk, income distribution by Real Estate
Investment Trusts (REITs) and Exchange Traded Funds (ETFs), and capital
New Products and Services
On 8 October 2012, the FTSE Group and Bursa Malaysia launched the "FTSE
Bursa Malaysia Small Cap Shariah Index" to serve as a benchmark for
Shari'ah-compliant investments in small-cap companies on the Malaysian
stock market. The new index forms part of the "FTSE Bursa Malaysia Emas
Shariah" universe and will be calculated on an end-of-day basis.
During the year, we continued to engage with institutional and retail
investors via established as well as new programmes so as to promote a
Central to our institutional investor engagement programme is the annual
Invest Malaysia conference, at which we highlight the strengths of our
capital market and profile our PLCs. At the 8th Invest Malaysia Kuala
Lumpur (IMKL), held on 29–30 May, we drew attention to our aim of being
a key driver of the ASEAN capital market. The conference attracted 2,113
delegates, including 110 foreign participants from 85 organisations.
IMKL was followed by the third instalment of Invest Malaysia Hong Kong
(IMHK), held on 8 November 2012 in collaboration with OSK Investment
Bank. It showcased 13 Malaysian corporations. Themed Capitalise on
ASEAN's Multinational Marketplace, IMHK was attended by 64 Hong Kong
fund managers from 49 organisations.
Targeting retail investors, we took our Market Chat programme to 80
semi-urban locations nationwide with the aim of educating and enticing
non-investors or non-active investors to the market. Off the beaten
track, we visited towns such as Sitiawan, Perak; Triang, Pahang; and
Bahau in Negeri Sembilan. For the first time, 15 PLCs participated in the
roadshows, providing retail investors the opportunity to interact directly
with their management teams.
Our investor engagement programme also targets the younger generation,
who represents future investors. To attract interest of Malaysian youth
in the capital market, in 2012 we hosted the annual Young Enterprise
Programme organised by the American Malaysian Chamber of Commerce
(AMCHAMP) at which we introduced the basics of securities trading to
Combined with visits to Bursa Malaysia, the educational efforts in
2012 benefitted more than 2,000 students who now have a better
understanding of the fundamentals of the capital market.
Following the migration of our derivatives market onto the Globex trading
platform in 2010, its reach has expanded internationally along with
greater operational efficiency. In 2011, we developed a new derivatives
clearing system which went live on 28 February 2012. This was followed
by further market development via new services and products in order to
lay a solid foundation for future growth.
A major technological enhancement was the implementation of a new
Derivatives Clearing and Settlement System (DCS) with multi-asset,
multi-currency and multi-time functionalities and capabilities with a
Standard Portfolio Analysis (SPAN) risk based margining system. The new
DCS has the capacity to handle high volume trade and is robust enough to
deliver complex products. With straight through and real time processing,
Clearing Members' requests are approved in real time through e-forms
and e-NSRs for tender processes. Post-trading, we have gone fully
New Products and Services
The new DCS allow us to launch new products to meet the growing
hedging and trading needs, including Options on FKLI (OKLI), Options on
Crude Palm Oil futures (OCPO) as well as the 3-Month Kuala Lumpur
Interbank Offered Rate Futures (FKB3). The latter was revitalised and
relaunched in response to market demand for a risk management tool.
Market making schemes were introduced to the OCPO, OKLI and FKB3
contracts to provide liquidity via two way quotes.
In terms of service, we are offering participants greater flexibility with
Negotiated Large Traded (NLT) and Exchange For Related Positions (EFRP)
facilities. With the EFRP, a futures position may be exchanged for a related
product or position such as a corresponding OTC swap position or futures
position listed on the Exchange. Due to familiarity, the take up rate of
these services is picking up.
In addition to migrating to CME SPAN, an industry standard for portfolio
risk assessment, Bursa Malaysia Derivatives Clearing (BMDC) reviewed
its default handling process and amended the terms of the standby letter
of credit used for margin coverage and security deposit. In December
2012, BMDC conducted an industry wide default drill to familiarise
participants with the procedure.
Creating of a More Vibrant Market
The Securities Commission (SC) had liberalised certain requirements
for derivatives market participants in 2011. In 2012, these were
complemented by a further relaxing of structural requirements for
Local Participants and dual licensees. The SC approved a two-day
familiarisation programme for new Local Participants (Locals), which
incorporates education on trading, systems and regulations. Coupled with
nationwide roadshows, 31 new Locals were recruited in 2012, bringing
the total to 155 as at end 2012. The recruitment of relatively younger
Locals has brought the average age of the group down from 50 to 45, in
line with efforts to rejuvenate our trader population.
The SC also liberalised the dual licensing requirements of remisiers to
having five years of experience and undergoing a six-day familiarisation
programme instead of 10 years of experience and undergoing a four-day
familiarisation programme. We believe this will inspire younger brokers to
offer securities and derivatives as a bundled service portfolio.
To enable Trading Participants (TPs) to extend their marketing reach, the
SC approved the setting up of branches and kiosks for those with a paidup
capital of at least RM10 million. This will allow traders to meet their
broker representatives more easily and acquire more product information
from the TPs.
Finally, referral agent activities have been given the green light, where
securities and futures brokers are allowed to refer their clients to one another.
This is anticipated to boost the number of participants in both markets.
Branding and Educational Initiatives
To promote our products and services, as well as to garner greater
interest in the marketplace, we organised and/or participated in a number
of events targeting different segments of our stakeholders.
Our global leadership in the palm oil market is reinforced by the annual
Palm and Lauric Oils Conference and Exhibition (POC) held in Kuala
Lumpur. In 2012, the exhibition themed Global Shocks, Local Impact took
place in March, attracting 2,000 delegates representing various sectors
of the edible oils industry from more than 50 countries.
We also partner with the Dalian Commodity Exchange (DCE) in organising
the annual China Oils and Oilseeds Conference (CIOC) in Dalian, and use
the opportunity to network with the large investor community in China.
CIOC 2012 was held in November, drawing 1,000 delegates. Prior to the
conference, in April, we conducted a market awareness programme for
our derivatives products in Shanghai, Beijing, Hangzhou and Guangzhou,
where our representatives met DCE futures brokers, Chinese end-user
clients and existing CME clients.
Another marketing and networking opportunity was created when we
hosted an FOW Derivatives World – Asia Roundtable with the agenda
Malaysian Derivatives: Global Access Through a Global Partner. This
saw presentations by key Malaysian futures brokers and Bank Negara
Malaysia. The discussions covered accessibility, FCPO benchmark pricing,
partnerships, operations, technology, regulation and capital controls.
We also conducted an educational programme for domestic institutions on
derivatives via the Breakfast with BMD platform, Bloomberg Commodity
Focus sessions and a joint seminar with the Palm Oil Refiners Association
of Malaysia. In addition, a joint derivatives retail marketing campaign was
conducted with TPs to increase awareness of trading professionally in
Targeting youth, we collaborated with the Securities Industry Development
Corporation (SIDC) to incorporate the derivatives licensing modules 14
and 16 into the finance and banking degree programmes at six local
universities. We also co-sponsored and conducted train-the-trainer
sessions to familiarise the university lecturers with the course content,
reading materials, trading practices and the application of derivatives tools.
In addition, we supported the Commodity Trading Challenge organised by
the CME Group. The challenge offers university students the opportunity
to compete in an international derivatives trading game where they trade
crude oil, gold and corn futures in a simulated and real time trading
Bursa Malaysia hopes to further expand its reach and accessibility via
direct access by US traders through the Globex trading platform. In
December 2011, following implementation of the Dodd Frank Act, the
Commodity Futures Trading Commission (CFTC) replaced its no-action
relief process with a registration process aiming to increase transparency
and improve pricing in the derivatives marketplace. Consequently, in
August 2012, we resubmitted our application for direct market access
for the CFTC's review.
As a result of conducting product awareness campaigns and seminars in
markets such as China, India, the United States and Europe, the number
of contracts traded by foreign institutions increased from 31% in 2011
to 36% in 2012.
Bursa Suq Al-Sila' (BSAS), our Islamic commodities trading platform,
recorded an 89% increase in the average daily value to RM2.3 billion
in 2012 as compared to RM1.2 billion in 2011, with an increase in
trade by foreign participants from 21% in 2011 to 30% in 2012. A
multi-commodity and multi-currency platform, BSAS currently offers
five commodities, namely Crude Palm Oil (CPO), Plastic Resin, Refined,
Bleached and Deodorised Palm Olein (RBD Olein), Hardwood Timber and
Softwood Timber, tradable in 22 currencies.
In July 2012, BSAS recorded the highest trade ever in a day of RM7.9
billion. The largest single trade was recorded when BSAS facilitated the
issuance of Celcom Transmission Sdn Bhd's sukuk for RM5 billion in
August 2012. In December 2012, BSAS recorded the highest monthly
trading value when the monthly total trading value hit RM66.3 billion.
BSAS also facilitated the issuance of sukuk by foreign companies such as
Abu Dhabi National Energy Company PJSC, Gulf Investment Corporation
G.S.C., JSC Development Bank of Kazakhstan, Bahrain Mumtalakat
Holding Company B.S.C, Noble House Limited and Golden Assets
International Finance Ltd. In total, 28 sukuk Murabahah were issued on
the BSAS platform in 2012, with a total value of commodities traded at
The number of trading participants on BSAS also increased, from 55 in
2011 to 69 in 2012, of whom 54 were local and 15 were foreign.
On the Islamic capital market front, we retained our leadership position as
the premier sukuk listing destination for the fourth consecutive year, with
20 programmes undertaken by 17 issuers, valued at a total of USD33.7
billion. We also hosted three new listings, two of which were non-ringgit
issuances. Pulai Capital Limited's USD357.8 million exchangeable sukuk,
the first sukuk to be priced at a negative yield, was listed in March 2012.
Within the same month, AmIslamic Bank Berhad added a RM2.0 billion
sukuk Musharakah programme to the Exempt Regime list. Towards the end
of the third quarter, Bursa Malaysia welcomed Axiata Group Berhad's multicurrency
sukuk programme, under which the largest RMB denominated
sukuk was issued.
THE LABUAN INTERNATIONAL FINANCIAL EXCHANGE
Labuan International Financial Exchange (LFX) recorded six new listings
in 2012, which included sukuk and bonds issued by domestic corporate
issuers and the Government of Malaysia. A total of USD2.9 billion was
raised on the LFX. LFX's market capitalisation as at 31 December 2012
stood at USD19.7 billion, with a total of 32 listed instruments.
TECHNOLOGY AND SYSTEMS
Technology remains a key driver of growth within the exchange industry,
and we are committed to investing in the latest innovations in order
to sustain a high level of operational efficiency while maintaining our
market competitiveness. In 2012, we invested RM25.4 million in various
features to facilitate key processes in our securities, derivatives and
Islamic markets, as described above in our Management Discussion and
Analysis. This amount represented a two-fold increase from 2011.
Commitment to a stable and secure technology environment will result
in a 100% system availability for all our core business systems. It also
contributed to the Bursa Trade Securities System being ISO 27001
certified. Having outlined our Strategic Intents, all technology resources
are now aligned to deliver our targets so as to make headway in achieving
our long-term goal.
The year 2013 promises to be as challenging as the year we have just
witnessed. However, we are confident of being able to build on the many
enhancements initiated in 2012, and to leverage on domestic liquidity as
well as the ASEAN growth story, to make further progress in the years
Our Business Plan for 2013 includes working on our four Strategic
Intents to heighten our competitiveness as a marketplace. Among the
changes in the pipeline are further enhancement of our trading system
to facilitate greater activity; greater diversification in our product portfolio
with exchange traded funds (ETFs), business trusts and new derivatives
products; and expanded participation in the derivatives market as a result
of further liberalisation of procedures and structures.
As an example, we will be revamping the participantship structure of
the derivatives market by decoupling clearing participants from trading
participants thus allowing for stand-alone clearing members. This will
create a single trading right across all classes of products at a cost of
entry comparable to regional futures exchanges.
Our ambition is to be Malaysia's most admired PLC as well as a leading
ASEAN marketplace. We realise we will face many challenges as we
strive to achieve these aspirations, yet we are firm in the belief that we
have established a strong foundation that will serve us well along the
next phase of our onward journey.