Wednesday, October 27

Bursa Malaysia seeks potential SMEs to list under LEAP market


KUALA LUMPUR: Bursa Malaysia Bhd is seeking potential small and medium enterprises (SMEs) from a pool of 148,678 establishments to be listed under the third market – Leading Entrepreneur Accelerator Platform (LEAP).

Chief executive officer, Datuk Seri Tajuddin Atan said the exchange operator had done two consultations with the businesses as well as on the rules and regulations to strengthen the platform.

He noted a healthy interest coming from the SMEs for listing on the LEAP market which will be launched by Prime Minister Datuk Seri Najib Tun Razak in conjunction with the opening of the annual Invest Malaysia Kuala Lumpur event on July 25.

“We have done the consultations and now is the time to balance all the things. But as an exchange, I will only allow if this is equitable and fair.

“We provide a platform under a particular environment so that everybody will be fairly treated, hence, we introduce advisers and reporting on a minimal basis,” he said in an interview with selected media organisations.

Also present was Bursa Malaysia chief operating officer, Datin Azalina Adham.

In March, SME Corporation Malaysia announced that the agency was working together with Bursa Malaysia to ascertain the SMEs to be listed on the SME market and that a few companies had been identified and underwent the evaluation process.

Bursa Malaysia had also, in June, issued new listing requirements and various amended rules for the LEAP market premised on three key underlying principles, namely cost efficiency, balanced and proportionate regulations and a qualified market for sophisticated investors.

“To create a market or ecosystem, it is a journey. With the introduction of a market, building the infrastructure and ecosystem is the key.

“Hence, the reason why we actually need to have a conversation on how to build our venture capital industry which is still nascent,” said Tajuddin.

He pointed out that the new platform would complement the Main Market and ACE Market, with the aim to address the funding gap faced by SMEs and also provide greater visibility via the capital market while be accessible only to sophisticated/qualified investors.

Sophisticated investors consist of high net worth individuals owning assets of more than RM3 million or with an annual income of more than RM300,000 or a combined RM400,000 for husband and wife.

Corporates with net assets of more than RM10 million as well as trust companies and partnership with more than RM10 million in assets are also within this category.

“Let this market grow first. If things work out, we can open to everybody. For the time being, those sophisticated investors with certain amount of capital, net worth or experience will be able to invest in this market. You must know risk-reward,” said Tajuddin.

Meanwhile, Azalina said trading under the LEAP market would be similar to the Main Market and ACE Market while the sophisticated investors would be determined under the “know your clients” procedure by brokers.

Tajuddin pointed out that the SMEs were overly dependent on getting their financing through banking institutions.

“The objective of creating this platform is, we want to determine if the companies are of high potential and help them by providing a platform to raise capital,” he maintained.

According to the SME Annual Report 2015/16, financial institutions accounted for about 96 per cent of the total SME financing with the capital market providing less than four per cent.

He said the exchange operator created a gap on the listed market sector by establishing the LEAP market as a qualified market for “early stage and expansion-phase” companies to raise capital.

“There will be an overlap but you can’t help having an overlap between LEAP and ACE market because of one simple thing, when we started the ACE market, the amount of funds being raised were slightly smaller.

“In the last three years alone, the minimum amount raised by the ACE market was above RM20 million. When that happens, all of a sudden there is a huge gap for a company which are now SMEs, (as they) felt they would not be able to attract the same attention,” he added.

Tajuddin said the LEAP market would allow a simple access for SMEs to be listed and then, these companies could be pipelined into the higher market platform when they are ready.

The listing is formulated on a light touch basis but balanced with prudential standards as assessments are being undertaken by advisers appointed by Bursa Malaysia.

“The list of potential advisers has been expanded to 64 organisations such as audit firms licensed by the Securities Commission Malaysia with CFA (Chartered Financial Analyst) licence. They now can apply to be an adviser,” said Tajuddin.

He added that other countries including India, the US, South Korea and China had introduced the platform, while Bursa Malaysia will be the first to launch such a platform in the Asean region.

“Our model roughly comes from South Korea and Taiwan. South Korea’s successful market is the Korea New Exchange that caters for SMEs. They even have a startups market.

“Thailand and Singapore are also trying to launch this market… Everybody needs this market,” he added.