Bursa and SC to stay open despite Covid-19 crisis

The capital market regulators say closing the stock market will create greater uncertainty and adverse market sentiment by denying investors’ access to their investments.

KUALA LUMPUR: Malaysia’s Securities Commission and stock exchange will stay open after stockbrokers earlier called on the authorities to shut it down to prevent a coronavirus market collapse, Reuters reported.

In a joint statement, the capital market regulators said they will maintain continuous trading and market operations so investors can manage their risks and opportunities.

“Closing the markets would neither mitigate nor address the underlying causes of market volatility.

“Instead, it will create greater uncertainty and adverse market sentiment by denying investors’ access to their investments,” the statement said.

The regulators would monitor developments to “proactively manage risks in the marketplace, and will introduce additional precautionary measures as appropriate”, they said.

The Association of Stockbroking Companies of Malaysia had urged the government to suspend stock trading immediately in line with the movement restriction order.

Chairman Azman Manaf said in a statement that “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.”

He noted that the Malaysian stock market had experienced a 23% drop in market capitalisation since the end of 2019 to RM805 billion on Wednesday.

The stock index fell on Thursday to its lowest level since 2009.

Malaysia’s 10-year bond yields have risen 61 basis points in the past two weeks at 3.37%.

MIDF Research analyst Adam Mohamed Rahim said the Malaysian stock exchange saw a foreign net outflow of RM1.23 billion from Monday to Wednesday, extending a foreign selling streak in the market to the 20th day.

Monday’s foreign net selling of RM520.4 million was the largest in a day since June 2018, he said. Year-to-date, international funds have pulled out RM6.40 billion.

Earlier, Reuters also reported that Bank Negara Malaysia had cut its statutory reserve ratio (SRR) today by 100 basis points to 2%, releasing RM30 billion into the banking system.

This move by the central bank came as the government grapples with the Covid-19 outbreak and plunging oil prices, it added.

This takes the SRR to its lowest level since the global financial crisis in 2009, when it was brought down to 1%.

This is the second cut in four months and comes just weeks after the bank slashed its key interest rate to 2.5%, its lowest rate in 10 years.

The move was clearly to mitigate the adverse effects of the virus outbreak on Malaysia’s exports and tourism.

Yesterday, Malaysia shut its borders to travellers, restricted internal movement, closed schools and universities and ordered most businesses to shut until March 31 to control the spread of Covid-19.

It has banned the entry of visitors and Malaysians returning home will have to undergo 14 days home quarantine.