Bursa should knock on more doors

BURSA Malaysia’s biggest problem is not a shortage of listings.

Rather, it is a shortage of large, investable companies that can grow earnings consistently and produce strong returns on equity.

When Permodalan Nasional Bhd’s president raised the issue last week, he was describing a constraint that many institutional investors have faced for years.

The pool of large-cap companies has remained largely the same over the years, with a few additions now and then.

The FBM KLCI is still led by banking, utilities and telecommunication names, which tend to be valued for stability and dividends rather than for rapid growth.

Six banks alone account for almost 42% of the index weightage.

That profile is not inherently negative, but it leaves Malaysia less competitive when international funds compare markets to position their portfolio.

It also limits how domestic investors can find growth exposure without going offshore.

One particular gap has become especially hard to defend.

Technology stocks, which are typically known for earnings acceleration and strong share price movement, have no representation among the 30 constituents of FBM KLCI.

In contrast, the Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla) collectively make up about one-third of S&P 500’s market capitalisation.

The absence of sizeable innovation-driven companies in the benchmark speaks to a broader issue. The exchange has not been able to attract enough new-economy names that can scale into the top tier.

Bursa often points to its initial public offering (IPO) pipeline to show that capital formation is happening.

But the pipeline lacks scale.

This year, of the 55 IPOs on the Main and ACE Markets, about 91% – 50 listings – raised less than RM200mil.

About 87% of the new listings also have a market capitalisation below RM1bil as of Dec 24, 2025.

Such scale can help broaden participation at the margin, yet it does not address what fund managers actually struggle with: deploying meaningful capital into companies with depth, liquidity and track record.

Over time, the imbalance shows up in the market’s growth relative to the economy.

Between 2015 and 2024, Bursa’s market capitalisation expanded at 2.38% compound annual growth rate, while Malaysia’s gross domestic product (GDP grew at 5.66%.

Markets do not need to track GDP in a straight line, but a persistent gap raises an uncomfortable question about whether the exchange is capturing enough of the country’s best businesses in listed form.

That is why Bursa needs a different game plan.

Bursa cannot operate as a venue that simply waits for issuers to show up.

It needs to act more like a recruiter with a target list, a value proposition and a willingness to work deals through.

In simple words, go out there and headhunt potential companies for IPOs.

And crucially, that search cannot be limited to domestic candidates.

If Bursa wants to upgrade the quality and breadth of its large-cap universe, it must look outwards for strong companies and treat foreign recruitment, including secondary listings, as a core part of building a more investable market.

Bursa should knock on every possible door of foreign companies, especially those from high-growth economies like India, China and even Asean.

For a company already listed abroad, a secondary listing provides a lower-friction route to enter Malaysia’s market ­ecosystem without giving up

its primary base. For investors, the benefits are tangible.

It expands the investable universe on a single exchange, allowing participation in sectors and business models that Malaysia’s domestic pipeline cannot currently supply.

It reduces the need for retail and smaller institutions to open overseas brokerage accounts simply to access global growth names.

It improves portfolio diversification while keeping custody, settlement and trading within familiar domestic infrastructure.

If the right companies are selected, it can also improve market quality by drawing more research coverage, increasing institutional engagement and raising expectations on disclosure.

It is noteworthy that secondary listings by foreign companies are only allowed on Bursa’s Main Market.

So far, secondary listings have been rare on Bursa.

In 2021, Australia-listed mining firm OM Holdings Ltd had its secondary listing on the Main Market, followed by UMS Integrated Ltd in August 2025.

Both listings were done by way of introduction, which involves shares of a company already traded on another exchange.

Of course, there needs to be caution, especially in bringing in foreign names into the Malaysian stock exchange.

Bursa had once seen a wave of China-linked listings, many of which later disappointed on governance, transparency and performance. That episode damaged confidence and left the market wary of foreign issuers.

The wrong lesson, however, would be to conclude that foreign listings are the problem.

The lesson is that screening and enforcement must be stronger than salesmanship.

If Bursa wants to look outward, it must be clear that it is targeting established businesses with verifiable track records, credible auditors, understandable cash flows and governance standards that can withstand scrutiny.

Bursa already has several criteria in place with regard to secondary listings by foreign companies, including the need to have primary listing on the main market of a foreign securities exchange specified by the Securities Commission Malaysia.

The company must fully comply with the listing rules of the said securities exchange; and the securities exchange where the applicant is primarily listed must have standards of disclosure rules at least equivalent to those of Bursa Malaysia.

The truth is, stronger recruitment alone will not solve everything.

Bursa still has to answer the first question foreign issuers will ask: can their shares trade with enough liquidity?

Malaysia’s market is heavily shaped by state-owned entities and institutions that hold large stakes in many blue chips.

Long-term ownership can provide stability, but it often limits free float and reduces trading depth.

That matters because large global funds need liquidity to build and exit positions without moving prices drastically.

It also matters because thin trading discourages coverage, which then further reduces investor participation.

If Bursa is serious about recruiting strong foreign companies, it needs a credible liquidity agenda that goes beyond general statements.

That agenda should include a push for higher free floats among large-cap constituents over time, deeper market-making and liquidity provision frameworks, and a structure that encourages research coverage and institutional participation.

It should also tighten the incentives around listing quality.

A market built on many small IPOs but limited large-cap replenishment will struggle to attract sustained foreign inflows, especially when regional competitors offer broader sector exposure and more liquid benchmarks.

The strategic point is that Malaysia’s savings pool is large, and the country has ambition to move up the value chain.

Capital markets must reflect that ambition.

When local investors cannot find enough growth and breadth at home, they will diversify through offshore equities, private markets or other instruments.

While that is rational behaviour, it is not advantageous to the Malaysian capital markets.