Published October 1, 2008
Ease bumiputra shareholding rules: Bursa
30% ethnic Malay equity requirement seen marring market's appeal
By S JAYASANKARAN IN KUALA LUMPUR

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BURSA Malaysia, the former Kuala Lumpur Stock Exchange, has asked the government to relax shareholding requirements that mar the market's attractiveness, industry officials say.

Eyeing investors: The policy is said to be making firms with overseas assets reluctant to list locally and driving a number of them to go private
The requirements - which stipulate minimum bumiputra, or ethnic Malay, shareholdings - are said to be making local companies with overseas assets reluctant to list locally, and driving a growing number of them to go private or list overseas.
Thirty per cent of a listed company's equity must be set aside for bumiputras, but this is not really being contested.
The main point of contention is that should a company top-up its capital base - say, through a rights issue - regulators can demand that bumiputra equity be restored to 30 per cent if it has been sold down. This has always been a concern because shareholders rightfully complain about earnings dilution.
The bourse wants the rules changed so that once a company is listed and the 30 per cent bumiputra equity requirement is met, it should no longer be subject to any top-up conditions.
Industry officials say Bursa Malaysia also wants all sale moratoriums to be abolished. At present, bumiputras cannot sell their shares inside a set time. This disadvantages them in bear market conditions, whereas non-bumiputras face no such limitation.
The officials also say Bursa has suggested that if there is no or insufficient take-up of bumiputra shares, these shares should be offered to the public instead of being placed in escrow, as they are now.
They point out that the current bear market has made it extremely difficult to find investors, as few shares trade above their initial public offer price.
According to them, only two of the past 12 listings have traded above their IPO price.
The 30 per cent condition originated with Malaysia's New Economic Policy, implemented many years ago after race riots.
The policy was originally slated to expire in 1990 but has been extended to 2020. It seeks to bridge economic disparity between bumiputras and richer non-Malays by discriminating in favour of bumiputras.
The original aims of the NEP were to eliminate poverty irrespective of race and to restructure society so no race would be identified with a specific economic function.
This was to be achieved through targets - specifically, 30 per cent bumiputra ownership in every sphere of society, from employment and occupation to house ownership and corporate equity.
Securities industry officials say Bursa Malaysia's proposals to ease bumiputra shareholding requirements will be considered by the country's Economic Planning Unit. It isn't clear if any of them will be approved, as similar suggestions have been made many times in the past. But this time the suggestions come from an arm of the government, which will carry more weight.
Also, the proposals are backed by powerful ethnic Malay businessmen including Nazir Razak, chief executive of investment bank CIMB and younger brother of Finance Minister and soon-to-be prime minister Najib Razak.