Four global new markets power ahead as our MESDAQ and the rest are left reeling behind

 

Kuala Lumpur, 13 June 2005 - SESDAQ, TSX-V, NASDAQ and AIM have provided investors with the highest returns of any global new market for the past three year period. Such performance signals a polarisation among global new markets where a selected few have established themselves as growing successful entities with either a strong or developing international presence whilst most others remain largely stagnant, operating within a domestic context of illiquidity and attracting too few quality companies, according to Grant Thornton International's Global New Markets Guide 2005.

Since the mid to late 1990s, when the majority of the world's new markets (broadly defined as those appealing to younger, high growth companies) were created, competition has been rife to create healthy environments to nurture fledgling and high growth companies and to then expand these markets' appeal to an international audience of companies.

Dato’ N K Jasani, Managing Partner of Shamsir Jasani Grant Thornton in Malaysia said, "Globally, a mere handful of markets can be said to have truly succeeded in attracting new companies and in growing investor appeal beyond national borders. SESDAQ, TSX-V, NASDAQ and AIM have, albeit for very different reasons, undoubtedly delivered value for money.”

The likes of GEM and the Mothers Market have also had a certain degree of success, particularly in terms of achieving critical mass, but have been less impressive in terms of delivering investor returns. Beyond this leading pack, with the exception of what constitute short-lived success stories, the equities landscape has been barren, with many countries maintaining a new market more for cosmetic value than business sense.

The Global New Markets Guide 2005 evaluates global new markets in terms of their 2004 performance based on a basic analytical criteria of looking at only those markets that have been in operation for more than three years, have at least 40 companies listed and a $3bn market capitalisaton. Just 10 markets* meet these criteria. 

"Whilst there are 36 new markets worldwide, the vast majority offer little or no appeal to domestic businesses, let alone international investors. Most markets are unable to break beyond the small cluster of domestic companies they list with others falling by the wayside such as the Czech and Dutch new markets that have now closed their doors", said Dato’ Jasani.

Meanwhile, some of the world's leading new markets are powering ahead. NASDAQ, which dwarfs all of the other new markets combined, remains the benchmark for growth companies around the world; however, other markets such as AIM, TSX-V and SESDAQ are holding their own. On the back of some impressive domestic performances the world's leading new markets are now pitching themselves at an international level in a bid to win the race to attract growing international companies with those from the growing Indian and Chinese economies often the most sought after.

Although not among the top 10 performing markets in the Guide, Malaysia’s MESDAQ has seen a twofold increase from 32 companies as at 31 December 2003 to 63 companies as at end of last year, raking in a total capitalisation of US$1,760 million which is equivalent to an increase of 72.5%. However, in terms of market capitalisation, MESDAQ is still lagging behind other more established markets, such as Singapore’s SESDAQ (double its size) and United Kingdom’s AIM (thirty five times its size) as at end of last year. 

In the last 5 months of 2005, the MESDAQ Index has given negative returns and has taken a 27.8% dive downwards from 122.84 points to 88.66 points. This compares poorly with a drop of 5.1% for Kuala Lumpur Composite Index.  On a longer time horizon, the drop in the MESDAQ Index is even steeper, recording a deep slide of 41.8% over a 17-month period since 1 January 2004.

Turning to our local investors and particularly our small retail investors, Dato’ Jasani said, “there has to be some form of benchmarking of share prices, which compares real-time price earning ratios, net tangible assets per share and dividend yields. The same will aid investment decisions to be made rationally and objectively.”

“In view of the fall in performance and investor confidence in MESDAQ, it will be prudent for the authorities to impose stricter rules, particularly on profit track record and moratorium for sale by founders to ensure for quality companies to be listed. Similar to SESDAQ of Singapore, our authorities should allow quality companies with substantial operations overseas to be listed as well. Our Securities Commission and Bursa Malaysia also need to consider liberalisation on foreign controlling shareholding and movement of funds to give our MESDAQ market a significant status in an increasing global business environment,” Dato’ Jasani emphasised.

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