Updated: Jun 16, 2020
The Association of Stockbroking Companies of Malaysia (ASCM) has urged the government to immediately suspend the trading of Bursa Malaysia Securities.
In a statement today, ASCM chairman Datuk Dr Azman Manaf said Bursa Malaysia should be suspended for the time being as a defensive measure to protect the stock market from suffering severe damage that could take almost a decade to heal.
Azman explained that the call to suspend trading activities at Bursa Malaysia was in line with the recent Movement Control Order declared by Prime Minister Tan Sri Muhyiddin Yassin.
He said the closing of FBM KLCI at 1,239.01 points on Wednesday showed that it had retraced by more than 28% from the end of December 2019, when it stood at 1,588.76 points, adding that market participants have already endured two major events recently, namely the change in government and the Covid-19 pandemic.
He added that stock exchanges around the world have plummeted, the worst being Wall Street.
“The Malaysian stock market has experienced a 23% drop in market capitalisation from RM1.04 trillion on Dec 31, 2019 to RM804.63 billion on March 18, 2020,” he said.
Azman highlighted that China suspended its Shanghai and Shenzhen Stock Exchanges amid the financial turmoil, and the Philippines also suspended its stock exchange on Tuesday (March 17), becoming the first country to suspend its stock market trade in response to the widening coronavirus pandemic.
He said the suspension order in Philippines was called after stock markets and oil prices went into freefall after its central banks' fresh stimulus measures failed to dampen investors’ fears.
Meanwhile, the Philippine Stock Exchange Index plunged 24% on Thursday on reopening after a two-day hiatus, while other Southeast Asian stock markets also sustained heavy losses on fears over the economic damage from the coronavirus pandemic.
The Philippine bourse opened 12.4% lower, triggering the first 10% circuit breaker following which a 15-minute trading halt was placed within minutes of the opening bell.
On resuming trade, the index fell 24.3%, marking its biggest intraday percentage fall on record and hitting its lowest level in nearly eight-and-a-half years.
“With the suspension of Bursa Malaysia, all participants of the stock market, i.e investors, market players, pension funds (EPF, LUTH, LTAT, PNB, etc), brokers, investment bankers, foreign investors and fund managers, will be able to utilise the time and relaxation to re-engineer their strategic and trading portfolios, as well as to avoid liquidation of accounts and force selling of leveraged accounts,” he said.
Azman cautioned that the negative impact will be catastrophic and possibly even drive the index below the 1,000 mark if no evasive action is put in place immediately.
“Such a catastrophe will definitely affect the national economy in the worst possible way. Banks will carry a huge amount of non-performing loans and public listed companies will see tremendous erosion of market capitalisation, while brokers will carry big contra losses and thousands of retail investors will experience bankruptcy,” he said.
Source: The Edge Markets