Call on Securities Commission to ensure that KLSE does not become world-famous as a  “30-seconds rally exchange”


Speech 2
- DAP Forum on “Malaysian Economic Crisis  - OPP3 & 8th Malaysian Plan”
by
Lim Kit Siang
 

(Kuala Lumpur, Wednesday): It is ironic that the first public appearance of the Finance Minister "on leave" was his  opening of the  “International Conference on   Corporate Governance - From Conformance to Performance” when Daim is the very personification of everything that is wrong with corporate governance in Malaysia.

In his earlier speech at the conference before his appearance in Parliament on Monday, Daim said corporate governance was not alien to Malaysia and that  it was "frivolous" to suggest that one economy needed corporate governance more urgently than another.

He said: "No government wishes to be branded capricious, instead they crave for legitimacy and credibility."

It is quite farcical for Daim to be opening a conference on “Corporate Governance - From Conformance to Performance” when Malaysia rate  so poorly in corporate governance  when compared with other leading  Asian economies, ranking among the highest in rules and regulations but  among the lowest in enforcement.

Thanks to Daim, Malaysia is still a long way from even conforming with international best practices, let alone  moving from the “conformance” to the “performance” model of governance where the corporate sector  is not just concerned with complying with the rules but trying to do better than that.

If there is good corporate governance in Malaysia, let alone “performance” model of governance, there would not have been the spate of corporate scandals where minority shareholder interests were flouted with impunity, as in the Renong and UEM cases or where government-linked funds and agencies were raided in the unending  bail-outs and buy-outs of troubled crony companies and individuals.

There would also be higher disclosure and transparency standards in the Kuala Lumpur Stock Exchange and the Securities Commission would not have failed in its statutory responsibility to promote fair and transparent securities markets.

For the past month, I had been calling on the Securities Commission  to  investigate market manipulations in  the stock market in the first  three months of the year through massive  institutional  purchases of  TMT stocks- Telekom Malaysia Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd -  in last three minutes and even the last 30 seconds  of trading to jack up the Kuala Lumpur stock exchange composite index (KLCI).

The Securities Commission Chairman Ali Abdul Kadir has thus far fought shy of launching any investigation into stock market  manipulation in the late buying support on the KLSE,  merely making the meaningless statement that the Securities Commission would not hesitate to act if there  is strong evidence of market  manipulation.

Ali should know that this “last-minute buying” consists of hundreds of lots of TMT shares being keyed in to buy only at the last 30 seconds, causing the shares to close artificially at a much higher price.  For example, Tenaga closed artificially higher at RM12.10 with 200 lots transacted in the last 30 seconds of 2nd April 2001, a jump of 50 sen.  On 3rd April morning, the price of Tenaga immediately drifted down to RM11.70 at the opening.

This last-minute manipulation is making the KLSE world-famou” as the “30- seconds rally exchange”.

At stake here is the reputation of the KLSE. How would foreign fund managers favour investing in Malaysia if the Securities Commission turns a blind eye to such market manipulations and is not even prepared to institute comprehensive investigations?

The 9.7 million Employees’ Provident Fund (EPF) contributors as well as the general taxpayers have a direct stake in a fair and transparent securities market because of the deep involvement of some RM40 billion EPF funds as well as other government-linked funds and agencies like the Pensions Trust Fund, Tabung Haji, Socso, Khazanah, etc,  in the stock market

The Securities Commission should also investigate into two nominee companies which had been very active in the last three months in both buying and selling the TMT stocks - namely Cartaban Nominees (Asing) Sdn. Bhd and HSBC Nominees (Asing) Sdn. Bhd.

Who are the real beneficial owners for these “Asing” nominees accounts, are they actually “Asing” or “Local Asings”. Transparency demands that the identity of the beneficial owners of these “Asing” nominee accounts should be made public.

In this connection, I am most surprised to find that the EPF also uses nominee companies to invest in the stock market.  Can the EPF explain what percentage of its RM40 billion invested in equities are bought through nominee companies in the KLSE and the reason why it had to resort to nominee companies to hide its identity when operating in the stock market, raising disturbing questions of accountability, transparency and integrity.

I call on the Securities Commission to set a good example of corporate governance and restore investor confidence by immediately launching an investigation into the “30 seconds rally” and the stock market  manipulation in the late buying support on the close of trading to show that it is serious in ensuring that Malaysia’s securities market is fair and transparent.

At all costs, Ali should ensure that the  KLSE under his watch does not become world-famous as a  “30-seconds rally exchange”.
 

(25/4/2001)


*Lim Kit Siang - DAP National Chairman