STAMP duty on shares of mid- and small-cap companies traded on Bursa Malaysia will be waived, effective next month, for three years, said Prime Minister Najib Razak today.

He also announced a trading link between the stock exchanges of Singapore and Malaysia to “widen investment options for investors” in both nations.

The deregulation was part of efforts to “enhance better value recognition and vibrancy in this segment of the stock market, as well as to encourage greater investor participation”, Najib, who is also finance minister, told investors at the World Capital Markets Symposium, organised by the Securities Commission (SC), in Kuala Lumpur.

The “Malaysia-Singapore Connect” would provide investors on both sides of the Causeway with seamless access to each other’s markets, with a combined market capitalisation of more than US$1.2 trillion (RM4.7 trillion) and 1,600 public-listed companies, Najib said in his keynote address.

There are 350 listed mid- and small-cap companies, with a total market capitalisation of RM217 billion, accounting for more than a third of the firms listed on Bursa Malaysia.

Other market liberalisation measures announced by Najib are:

– Liberalised margin financing rules;

– Intraday short selling to be allowed for all investors;

– A new category of traders, known as “trading specialists”, who trade on their own account, will be introduced;

– A volume-based incentive programme will be introduced by the exchange to catalyse greater trading activity; and,

– All new investors will be given a waiver on trading and clearing fees for six months, to encourage more participants to trade in the Malaysian market.

“These are just some of the steps we are taking to ensure that we do indeed participate in a renaissance of capitalism, and that our growth is shared by all,” said the prime minister.

Present were SC chairman Ranjit Ajit Singh and Bursa Malaysia chief executive officer Tajuddin Atan.

It is unclear whether “trading specialists” refer to retail traders or a new class of licensed brokers.

Najib did not speak to reporters after delivering his address.

Retail trading, especially foreign exchange trading, is restricted in Malaysia. Retail traders do not require a licence.

Short sellers seek to profit from declining prices by selling borrowed securities and repurchasing them at a future price.

Leveraged short selling was restricted in Malaysia following the Asian financial crisis two decades ago, when prominent speculator George Soros placed large short positions against the Thai baht in 1997.

Then prime minister Dr Mahathir Mohamad had blamed Soros for aggravating the crisis.

Ranjit told a press conference today that the Monetary Authority of Singapore (MAS) and SC were “working together” to establish a stock market trading link between Bursa Malaysia and the Singapore Exchange by year end.

He said the trading link was to allow investors to trade and settle shares “in a more convenient and cost-efficient manner”.

“The establishment of this trading link is an important step towards encouraging Asean investors to invest in Asean.”

Lee Boon Ngiap, assistant managing director of MAS, said the trading link would lower costs, improve liquidity in both markets and and encourage “cross-border investments” in stocks.

“I hope this initiative will, in time, expand to include the rest of the stock exchanges in Asean.”

Malaysia’s capital market had grown to RM3.2 trillion, with an average fundraising of more than RM110 billion annually, Najib told investors. – February 6, 2018.