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Asian Markets

:
Strategy for Internationalisation

Presented by
Mohd 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,
Contents
Contents

❖ Incorporation of Malaysian Derivatives
Exchanges
❖ Rationalisation of Malaysian Derivatives
Market Institutions
❖ Bursa Malaysia: Transformation Process
❖ Bursa Malaysia: A Single Exchange
❖ Market Statistics
❖ Malaysian Government Policies
❖ Recent Developments in Malaysia
❖ Key Developments by Bursa Malaysia

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Incorporation
Incorporation of
of Malaysian
Malaysian Derivatives
Derivatives Exchanges
Exchanges

❖ 1980
Establishment of the Kuala Lumpur
Commodity Exchange (KLCE) with CPO
Futures

❖ 1995
The Kuala Lumpur Options and Financial
Futures Exchange (KLOFFE) was established
and KLSE CI Futures contract was launched

❖ 1996
Malaysia Monetary Exchange (MME) was
established and the 3 Month KLIBOR Futures
was launched

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Rationalisation
Rationalisation of
of Malaysian
Malaysian Derivatives
Derivatives Market
Market
Institutions
Institutions (1)
(1)
❖ 1998
KLCE merged with MME to form COMMEX

❖ 1999
KLOFFE purchased by the Kuala Lumpur
Stock Exchange

❖ June 2001
Incorporation of MDEX – Merger of KLOFFE
and COMMEX

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Rationalisation
Rationalisation of
of Malaysian
Malaysian Derivatives
Derivatives Market
Market
Institutions
Institutions (2)
(2)
❖ June 2002
Approval of the transfer of MDCH from MDEX
to Securities Clearing Automated Network
Services (SCANS), a wholly owned subsidiary
of the Kuala Lumpur Stock Exchange

❖ August 2002
The sale of MDCH to SCANS was completed

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Bursa
Bursa Malaysia:
Malaysia: Transformation
Transformation Process
Process

Previous
PreviousStructure Present
Structure PresentStructure
Structure

• Company limited by Demutualisation • Company limited by shares Listing
guarantee
• Exchange holding company
• Operating stock exchange
(64 Member Companies)

Completed: Listed:
100%
5 January 2004 18 March 2005

Bursa
Bursa Malaysia
Malaysia
Derivatives
Derivatives
• Company limited by shares
• Derivatives exchange
•Business Rules

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Bursa
Bursa Malaysia:
Malaysia: AA Single
Single Exchange
Exchange

BURSA MALAYSIA BERHAD
Equities
Equities Market
Market Derivatives
Derivatives Market
Market Offshore
Offshore Market
Market
Bursa
Bursa Malaysia
Malaysia Securities
Securities Bhd
Bhd Bursa
Bursa Malaysia
Malaysia Derivatives
Derivatives Bhd
Bhd Labuan
Labuan International
International
Main
Main Board
Board MESDAQ
MESDAQ
Financial
Financial Exchange
Exchange (LFX)
(LFX)
Second
Second Board
Board Market
Market

●● Companies
Companies ●● Growth
Growth &
&
with
with track
track Technology
Technology
record
record Companies
Companies

Common
Common Depository
Depository Integrated
Integrated Clearing
Clearing House
House Clearing
Clearing &
& Depository
Depository
Bursa
Bursa Malaysia
Malaysia Depository
Depository Bursa
Bursa Malaysia
Malaysia Bursa
Bursa Malaysia
Malaysia Citibank,
Citibank, Deutsche
Deutsche Bank
Bank
Securities
Securities Derivatives
Derivatives
Clearing
Clearing Clearing
Clearing

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Derivatives
Derivatives Products
Products Listed
Listed on
on Bursa
Bursa

❖ Bursa offers equity, financial and commodity
derivatives for trading:
Crude Palm Oil Futures (FCPO)
Crude Palm Kernel Oil Futures (FPKO)
Kuala Lumpur Composite Index Futures (FKLI)
Kuala Lumpur Composite Index Options (OKLI)
3-Month Kuala Lumpur Interbank Offered Rate
Interest Rate Futures (FKB3)
Three-Year Malaysian Government Securities
Futures (FMG3)
Five-Year Malaysian Government Securities
Futures (FMG5)
Ten-Year Malaysian Government Securities
Futures (FMGA)

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

3,000,000 90,000

80,000
2,500,000
70,000

2,000,000 60,000

Open position
Turnover

50,000
1,500,000
40,000

1,000,000 30,000

20,000
500,000
10,000

0 0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Volume OP

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

FKB3 FMG3
4.16% 0.23%

FKLI
52.98%

FCPO
41.75%

FMG5
0.88%

FKLI FMG5 FCPO FKB3 FMG3

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FCPO
FCPO Volume
Volume &
& OI
OI

200 40

180 Volume Open Position 36

160 32

Open Position(‘000)
140 28
Volume (‘000)

120 24

100 20

80 16

60 12

40 8

20 4

0 0
Jan-01
Jun-01

Feb-03
Jan-96
Jun-96

Feb-98

Jul-03
Jul-98

Apr-02
Oct-99

Aug-00

Sep-02
Apr-97

Dec-98

Mar-00

Oct-04
Sep-97

Dec-03

Mar-05
May-99

May-04
Nov-01
Nov-96

Note: Migration to Electronic Trading on 29 December 2001

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

60 (33.12%)
Proprietary 57015
(<1%)
Locals
Participants

Local Retail 34180
(19.86%)
Foreign Retail 4440

(2.58%) 43441
Local Institution

Foreign Institution 33002 (25.24%)

0 10,000 20,000 30,000 40,000 50,000 (19.17%)
60,000

No. of contracts

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)
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FKLI
FKLI Volume
Volume &
& OI
OI

Figure 1. KLCI Futures
140,000 20,000
130,000 Volume Open Position 18,000
120,000
110,000 16,000
100,000 14,000
90,000

Open Position
80,000 12,000
Volume

70,000 10,000
60,000
8,000
50,000
40,000 6,000
30,000 4,000
20,000
2,000
10,000
0 0
J an-98

J an-03
J un-03
J un-98

Feb-05
Feb-00
Aug-97

Sep-99

Aug-02

Sep-04
J ul-00
Apr-99

Apr-04
Oct-96

Oct-01
Dec-00
Dec-95

Mar-97

Mar-02
Nov-98

May-01

Nov-03
May-96

Note: FKLI was downsized on 19 September 2003

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

Proprietary 112
(<1%)
Locals 37974 (43.21%)
94390
(17.38%)
Local Retail
Participants

Foreign Retail 2823

1099 (1.29%)
Local Corporation

Local Institution 8283 (<1%)

Foreign Institution (3.79%) 73779

0 20,000 40,000 60,000 80,000 100,000 (33.77%)
No. of contracts

Record Monthly Volume : 136,870 contracts (May 2004)
Record Daily Volume : 16,169 contracts (26 July 2005)
Record Daily Open Interest : 33,243 contracts (26 June 1998)
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Malaysian
Malaysian Government
Government Policies
Policies
❖ Overall aim to push forward and enhance
Malaysia’s competitive standing regionally and
internationally
❖ Move towards becoming a supportive and
effective enabler of business, by putting in place
conducive conditions and creating opportunities
for the private sector to thrive
Reform of government-linked companies (GLCs) with
the aim to make them more performance-driven,
efficiently-managed, commercially-focused and
customer-oriented
Develop a strong and vibrant domestic capital market
as a key enabler in securing healthy longterm
economic growth of the country
Move forward with deregulation and liberalisation
Transforming the services sector
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Liberalisation
Liberalisation of
of the
the Capital
Capital Market
Market

❖ The following measures were announced by
the Malaysian Government in September
2004, and incorporated in the 2005 Budget:
100% foreign ownership in futures
broking industry
Issuance of up to 5 new licences to
foreign stockbrokers
Issuance of up to 5 new licences to
foreign fund managers
No restrictions on the number of foreign
dealer representatives

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Liberalisation
Liberalisation of
of Capital
Capital Controls
Controls

❖ Bank Negara Malaysia (BNM) announced
further relaxations of the foreign exchange
administration rules with effect from 1 April
2005. These include increased flexibility for
residents to investment aboard, extension of
credit flexibilities to non-residents, and
facilitation of better and more efficient risk
management of currency exposure for both
residents and non-residents.
❖ These measures are part of BNM’s continuous
effort to further enhance the business
environment, increase efficiency of the
regulatory delivery system and promote
wider risk management options.
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De-peg
De-peg of
of the
the Ringgit
Ringgit

❖ BNM announced on 21 July 2005 that the
exchange rate of the Ringgit will be allowed
to operate in a managed float, with its value
being determined by economic fundamentals.
❖ BNM will monitor the exchange rate against a
currency basket to ensure that the exchange
rate remains close to its fair value.

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Key
Key Developments
Developments by
by Bursa
Bursa Malaysia
Malaysia

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.
Common Trading Platform
•Implementation of new derivatives trading system by Q3 2005
•Open API and facilitates Direct Market Access
Regulatory Review
• Amendment to Business Rules - allow opening of omnibus a/c
Education, Marketing & Promotions
•Investor roadshows and conferences i.e. Invest Malaysia 2005,
Palm & Lauric Oils Conference & Exhibition

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Q&A

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Derivatives Marketing
Bursa Malaysia Bhd
10th Floor, Exchange Square
Bukit Kewangan

www.bursamalaysia.com

derivatives@bursamalaysia.com

+ 603 2034 7188

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