Speaking at the “Invest Malaysia 2008” conference here today (25th Mar 2008), the Prime Minister Abdullah Badawi announced that local stock market would merge its Main and Second boards to set up a single and unified board for more established companies with strong financial records (huh?). The third board, Mesdaq, which caters mainly to technology companies that are not qualified for listing on either the main or second board will be revamped to allow relatively smaller companies to access the equity market at an earlier stage of their life cycle.
Now, hold your horse as you should take this with a pinch of salt. Forget about the marketing talks that by combining both boards (Main and Second) it will miraculously create better established companies, let alone boosting stronger financial result or investment. The Main and Second board were created for obvious reason – to separate the “proven” and larger capitalized companies (Main board) from the “smaller-revenue” medium-sized companies. In short Second board companies that didn’t qualify for listing into Main board would need to “prove itself” financially before could be considered to be upgrade to Main board.
The merger could be argued from both flips of the coin. While the anxious government’s objective understandable (to attract) is to project to (foreign) investors that the stocks from both Main and Second board are of quality companies, in reality you cannot hide the fact that there’re dozens of junk stocks of which the real objective for their listing were to whack good money from the public before let it rot naturally. This applies to both Main and Second board and if you’re interested in such junks just look at those penny stocks.
So it’s misleading to assume that by merging both boards, the listed companies will automatically become paradise with strong earnings and revenue. You wish to change the perception that all the stocks post-merger are of top-quality? Why not start from the respective agencies such as Bursa Malaysia Berhad (KLSE: BURSA, stock-code 1818), Securities Commission, Central Bank, Judiciary, Anti Corruption Agency (BPR) and others? There’re tons of companies that got listed without a sound business model, let alone a sustainable profit and revenue history. Underwriters were paid good money to drum up IPO in order to attract hot money from the public. Minority shareholders were taken as suckers.
I’m not against a unified board but the root of the problems to achieve such merger’s objectives should be studied and tackled. It’s like telling the public that all the policemen will not corrupt instantly simply because they put up the badge that says “I do not accept bribe”. And please do not assume the over 600 local and international delegates who attended the conference are as stupid as some Malaysian who thought it was the greatest achievement ever when the country blasted a space tourist up into the space.
Hmmm, what happen to the culprits who cooked up the accounting books? The recent 130 points plunge after the political tsunami should serve as a reminder of how fragile your investment is if most of the stocks are somehow tied to a “flawed framework” that related to politics. The only people who will suffer the most are the small investors and newbies who normally do not do their homework but assume blindly all the stocks are the same. At least with the separation of boards as of now, these idiots know the Second board stocks literally carry higher risks.
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