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Stockbroking industry looking to boost retail participation

RETAIL participation on the local bourse is shrinking at a time when Malaysia’s stockbroking industry is seeing intense competition with new entrants coming on board, including the recent launch of trading and investment app Moomoo.

Industry players stress that retail participation must be given a boost to ensure market vibrancy. However, the challenge lies in beefing up a segment that appears to be slowly but steadily declining over the years, with those in the younger age group disinclined to invest in a stock market that has generally underperformed its regional peers.

Last August, Securities Commission Malaysia (SC) chairman Datuk Seri Dr Awang Adek Hussin said only 7% of investors in the stock market were under the age of 45. There were even fewer investors aged between 20 and 30. The regulator has been calling for greater participation from the younger generation to ensure market vibrancy.

SC data show that in terms of value traded, the participation rate of retail investors declined to an average of 25.7% in 2022 from 34.6% in 2021. Nevertheless, it remained above the pre-pandemic five-year average of 18.8%.

Tengku Ariff Azhar Tengku Mohamed, officer-in-charge and chief operating officer at Maybank Investment Bank (Maybank IB), acknowledges that the stockbroking industry has been affected by reduced retail participation and is urging concerted efforts by industry stakeholders to increase market liquidity and depth to stimulate retail participation.

The going may be tough because, according to data compiled by MIDF Research, retail investors have been net sellers on Bursa Malaysia since the beginning of the year, with RM827.1 million worth of local equities net sold.

New products, offerings and methods of trading are necessary to attract retail participants, say industry players, even with the industry enduring margin compression for a while now because of the discounts offered by some brokers that range from low to zero trading fees.

Ariff stresses that Maybank IB differentiates itself as a full-fledged broker with full value offerings, including advisory solutions, research, innovative corporate access, tailored structured products, share margin facilities and personalised services.

“In line with Maybank’s M25+ strategic thrusts of digitalisation and customer-centricity, we are investing in our trading platform to offer an improved, seamless trading experience. We look forward to unveiling these new features soon,” he tells The Edge.

Malacca Securities Sdn Bhd managing director Lim Chia Wei believes the stockbroking industry is “big enough” to accommodate new players and is confident of the group’s plan to further grow its customer base to 100,000 this year from over 60,000 currently.

“We don’t see all these entrants as a threat, but we see it as a good thing for the market. It helps us in terms of product innovation and we need to step up our game,” she says.

“With increasing competitiveness, consumers will have more choices. We believe that a market is big enough for new entrants and all of us. We do have our own competitive advantage as we have both online and offline hybrid approach, where we still have our dealers and remisiers who are able to deliver value to our clients,” she adds, noting that the launch of “M+ Global” last year has helped the company’s clients to explore more opportunities in the US and Hong Kong markets.

CGS International Securities Malaysia Sdn Bhd deputy CEO Khairi Shahrin Arief Baki agrees that the challenge for existing players is to be more competitive in terms of product offerings that can meet the needs of clients in addition to rolling out regular campaigns to promote their products, services and solutions.

“Marketing promotions are part and parcel of staying competitive and ensuring top of mind recall among clients and potential clients. We have lowered our cross-border trading fees and launched the ‘Beyond Borders’ campaign, where clients can win prizes,” he says.

Additionally, CGS Malaysia will leverage its Asean network to bring new products, services and solutions to its clients.

“CGS Malaysia has a lot going on this year in our pipeline. Our parent China Galaxy International recently completed the acquisition of the residual stake in our joint venture with CIMB and the group is now known as China Galaxy Securities International. The group has an exciting and ambitious plan ahead. Any targets will be announced at the right time,” says Khairi.

Developed by Hong Kong-based Futu Holdings Ltd, the newest kid on the block Moomoo sees significant potential in the local market, considering the large youth population in Malaysia but low participation in stock trading.

At its launch last month, Moomoo Malaysia CEO Ivan Mok declared: “We are not here just to compete with the local brokers. We are here to actually build the size of the market.”

Moomoo currently offers zero commission fee for 180 days to all new users of its platform.

Others have also been trying to reduce costs for participants. Rakuten Trade, for one, has reduced its brokerage fee to RM1 since last year — from RM7 previously — for transactions of up to RM699.99.

In response to The Edge’s queries, Mok says, “The 0% commission campaign is a critical element, alongside our upcoming product rollouts and promotions. However, we differentiate ourselves by prioritising long-term value creation.

“A substantial portion of our resources are dedicated to fostering lasting relationships with Malaysian investors. This includes continuously refining our platform for seamless usability, developing innovative features that cater to evolving needs and delivering an exceptional customer experience.”

Within a week of its launch here, Moomoo added 30,000 new clients, says Mok. “Building on our global fintech expertise in markets like Singapore and Hong Kong, we aim to set a new technological benchmark in the Malaysian brokerage sector,” he adds.

Commenting on the outlook for trading activity, Maybank IB’s Ariff expects the execution of macroeconomic blueprints and strong corporate earnings delivery to lift the FBM KLCI.

“A rerating is possible as economic and institutional reforms are executed to facilitate new growth drivers, leading to an improved risk-reward. The global macro environment also remains supportive, with the global tightening cycle likely at the tail end. [Also,] the electronics cycle is expected to turn around,” he says.

Moomoo’s Mok is of the view that the projected economic growth of 4% to 5% this year sets a robust foundation for investor confidence and market participation. “Government initiatives focused on economic recovery further bolster this positive outlook, especially as Malaysia’s outlook aligns favourably with growing investor interest in Southeast Asia.”

Closing at 1,541.41 points last Thursday, the FBM KLCI had gained 6% year to date. Bursa Malaysia’s monthly statistics show that market trading volume touched a recent high of 117.5 billion shares in January, with a trading value of RM70.4 billion. Last month, it eased to 73.4 billion shares worth RM56.1 billion.

Malacca Securities’ Lim remains positive on the local market following the pickup in trading of Malaysian equities early this year. “This time, the trading is not just in smaller-cap stocks, but also bigger-cap stocks.”

She observes a sharp rise in interest in US stocks on the company’s trading platform, driven by the Magnificent Seven rally. “The US election is happening this year, so we do expect an increase in trading activity in the US market.

“However, for the Hong Kong market, it is not as active or not as attractive to retailers right now. That said, our offerings for Hong Kong’s IPOs (initial public offerings) are still attracting a lot of interest. We are the only local broker that is offering Hong Kong IPOs to clients directly via share subscription.”

Over the past year, three major US indices — namely, the Dow Jones Industrial Average, S&P 500 and Nasdaq — have gained an impressive 21.3%, 32.7% and 40.3% respectively. The US stock indices continued to hit record highs last week after the US Federal Reserve maintained interest rates and stuck to its projection of three rate cuts this year.

In comparison, the FBM KLCI has gained 9.6% over the past year.

CGS’ Khairi is of the view that Malaysia will be able to achieve the economic growth target of 4% to 5% this year, premised on the execution of new policies and being a key beneficiary of heightened tensions between the US and China.

“The government rolled out a lot of new policies in 2023 such as the NIMP 2030 (New Industrial Master Plan 2030), NETR (National Energy Transition Roadmap), i-ESG, and Hydrogen Economy and Technology Roadmap. These are intended to support the nation’s shift towards net zero as well as to stimulate the growth and development of new economies, as well as to reindustrialise the country. At the same time, the intent is to position Malaysia as a hub for many different sectors such as electrical and electronic products, automotive, renewable energy, Islamic finance and sustainability,” he says.

“In addition to that, the tensions between the two superpowers have encouraged countries aligned with the US to decouple from China and look for alternative partners for their manufacturing needs. Malaysia has a long history of being a hub for manufacturing and is in a great spot to take advantage of this opportunity. Currently, there is a massive push by the government to build further momentum and ride the uptick in demand for chips and semiconductors from the automotive industry.”

Financially, 2023 was a good year for brokerage firms listed on Bursa Malaysia as they posted better performances.

Kenanga Investment Bank Bhd’s net profit rose by a third to RM72.64 million in 2023 from RM54.51 million a year earlier. Its stockbroking division’s profit before tax (PBT) jumped sixfold year on year to RM16.1 million, attributed to higher trading and investment income, as well as net brokerage fee, which was consistent with improved investor sentiment.

Apex Equity Holdings Bhd’s earnings expanded 14.2% to RM7.32 million last year from RM6.41 million in 2022, as its PBT for the stock and securities broking division surged 45.3% to RM11.49 million. 


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