Jan 19 2007
I’m amused when I read today’s news that Bursa Malaysia (KLSE: BURSA) plans to ease controls over the short-selling after it was started less than a month this year (after a nine-year ban). The KLSE chief executive officer Datuk Yusli Mohamed Yusoff said that the local bourse plans to introduce a new Islamic index next week and start the trading of US dollar crude palm oil (CPO) contracts.
He reasons that such plans will improve the overall quality of Malaysia market 
and attract international investors. After the slow start, he still has not smelled the root problem of the slowness in short-selling business. He further added that “hopefully” some loosening controls will kick-in end of the year. He should tackle the basic fundamentals issue with short-selling which aren’t seeing any encouraging activities since it was started. Simple questionnaires with brokers and investors (both retail and institutional) should shed some lights on what are the bottlenecks.
and attract international investors. After the slow start, he still has not smelled the root problem of the slowness in short-selling business. He further added that “hopefully” some loosening controls will kick-in end of the year. He should tackle the basic fundamentals issue with short-selling which aren’t seeing any encouraging activities since it was started. Simple questionnaires with brokers and investors (both retail and institutional) should shed some lights on what are the bottlenecks.Ask yourself simple question – why aren’t you short-sell now? Are you buying instead of short-selling? While I understand the regulated over short-selling is to prevent the same incident as in 1997 Asia Economy Crisis from happening again whereby most of the investors shorts the market causing the stocks to tumble even faster, Bursa Malaysia has to understand that stock market is an open place for both buyers and sellers transacting their demand and supply. You can’t put a handcuff on investors and at the same time expect them to function effectively.
Either you remove all those ridiculous high-costs associated with short-selling and simplify the procedure or you just do not allow short-selling. Allow short-selling for the sake of telling foreign investors that Malaysia market has been liberalized further while the regulations tell otherwise will not make investors any happier. If an un-restricted short-selling will bring down the whole stock market to the ground, New York Stock Exchange (NYSE), Nasdaq, London Stock Exchange (LSE) and other European stock exchanges would have collapsed centuries ago.
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January 19th, 2007 by financetwitter
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