Shorter stocks trading hours will create higher Volatility

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Dec 27 2007
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This seems to be a good idea – the suggestion to shorten the Malaysia Stock Exchange’s trading hours from the current 9 a.m. – 5 p.m. to 10 a.m. – 4 p.m. It was suggested by Malaysian Investors’ Association (MIA) today. Frankly I’ve no objection to such a proposal simply because I do not see the co-relation between longer trading hours with the transaction volume.

I agreed that if a busier stock market such as Hong Kong Stock Exchange could coup with their daily transaction within market period of 10 a.m. to 4 p.m., a smaller market such as Malaysia’s shouldn’t have much issue about doing so. Wall Street’s trading hour is from 9:30 a.m. to 4 p.m. EST. although New York Stock Exchange (NYSE) had mooted the idea of extending its trading hours in the past.

Bursa Malaysia shorter trading hourHowever I’m not quite sure that shorter trading hours would make any difference to how the local stock market will react given the additional one hour for brokers, analysts and researchers to digest overnight US financial information. Under normal circumstances the local stocks will react relatively to Dow Jones’ overnight performance, and it will remains regardless of the trading hours. So a 300-points plunge in Wall Street will send the local stocks into the red regardless of the trading hours.

Will it affect the daily volume? Not really since serious investors or traders would adapt to the new trading hours and their buying or selling would eventually find its way. In fact with more and more investors or traders trading online, you could experience a higher volatility or stocks movement per hour with such shorter trading hours. Will it create healthier investors? Definitely considering the lesser time in tracking the stock market, not to mention ample time for them to enjoy their breakfast before starting their job *grin*. What do you think?

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