Question

Provide a suggestion on making a significant improvement on the growth of primary market of MALAYSIAN STOCK MARKET.

Answer 1

To achieve high level of economic growth growth of the capital markets is mandatory. Capital market consist of primary market and secondary market. Basically primary market is the source of raising Finance for the new project or expansion and diversification activities of existing businesses. There are several suggestions for improvement in the growth of primary markets of the Malaysian stock markets are which are as follows :-

1] promote capital formation:- as everyone knows capital is the first requirement to start any new business. Therefore there should be a concrete plan available in the stock markets which helps new companies to raise capital easily from the primary market as well as there should be an open environment for capital raising for small and midcap companies. There should be also some provisions to finance large corporates and risky Ventures. This in turn will lead to investments of social savings into high earning ventures/ projects. The environment of capital market should promote investment in socially responsible projects.

2] Facilitate internationalisation - the main objective behind the suggestion is that opportunities available in global markets need to be tapped. Expansion activities of existing businesses in other countries need to be financed or companies can easily ways finances for their international activities. In short the capital markets should work in an environment which doesn't have boundaries or restrictions top countries. Enhancing the Global reach will definitely improve economy of scale to newer heights.

3] Expand intermediation efficiency and scope :- This approach focuses on increase of private sector participation in venture capital and private equity companies. Venture capital plays a vital role in financing new companies or startups. Generally these companies are high growth companies and require capital for the growth. Providing significant funding and tax incentives high growth companies is important because they result in overall growth of the entire industry. Apart from venture capital funding capital can be raised through private equity companies cater the needs of capital required for high growth companies.

4] Promoting growth of small and midcap companies :- this is one of the important task of the of capital markets or stock markets to promote the growth of small and midcap companies. Government of Malaysia an environment to the stock markets which will increase and strengthen the economic functionality of stock markets which will promote role of small and midcap companies. Once a Company is reached to a specific size it can raise capital through initial public offerings and public markets. If stock markets are strengthened enough they will facilitate these activities small and midcap companies and help them in fundraising. Small and midcap companies or say growth companies contribute to economic growth as well as innovation, job creation in the initial stages and enhancing the returns to their investors in the long run.

5] deepen liquidity and risk intermediation :- malaysian stock market has seen low level of liquidity available in stock markets. This has Always been a concern for the Malaysian stock market. Efforts have been made to improve the infrastructure as well as widening participation into stock markets but it resulted into high velocity of turnovers. Low level of liquidity results in narrower risk return profile for the investors as well as companies raising capital from the stock markets. If the liquidity crunch is solved emerging companies will participate in the stock market more actively as they are tend to anticipate higher risks in their projects. When the risk profile is higher anticipated Returns are also higher that's why the capital market should be strengthened enough to braoden the risk return profiles of the companies. When there are more participants the volatility in the stock market also increases and results in higher risk hence companies need to be safeguarded in such situations.

6] Capacity Building and strengthening information infrastructure:- as it is known that stock markets or capital markets acts as intermediaries in the companies and the investors. Due to globalisation and competition in the market work environment it changing rapidly. New developments in technology are taking place as well as innovative ideas are coming up rapidly. To tackle all these issues skilled workforce is required as well as technology can be upgraded infrastructure is also required for the smooth functioning of the capital market. This will help in facilitating the capital markets to the companies in catering all the ways of fundraising, acquaintance with new technology in executing the changing requirements of companies and also gaining competitive advantage over The Other Global markets.

These are some suggestions for the growth in primary markets of Malaysian stock markets.