The government's decision to review the proposed stock market trading link between Bursa Malaysia and the Singapore Exchange (SGX) has left analysts in limbo as little detail has been provided thus far.
InterPacific Securities Head of Research Pong Teng Siew said the review of the Bursa Malaysia-SGX Link could involve either the nature or the structure of the trading link or the abolishment of the link, which he believed was unlikely.
"The trading link aims to promote access to Malaysian stocks for foreign investors and vice-versa, so the review could be something more on the structural review rather than a cancellation.
"Perhaps the review could also include the merger of both exchanges, but I do not think so," he told Bernama.
Dubbed the 'Malaysia-Singapore Connect', the link was announced in February this year to provide both Malaysian and Singaporean investors an easier and seamless access to the stock market of each country.
The proposed trading link, scheduled to be launched by year-end, will be facilitated by the Securities Commission and the Monetary Authority of Singapore (MAS).
However, Prime Minister Dr Mahathir Mohamad announced today that the trading link would be put under review.
Hermana Capital Bhd CEO and CIO Nazri Khan Adam Khan believed the review was aimed at boosting market liquidity, especially among the retail participants on both the stock markets.
“If the government plans to cancel it, the move will potentially upset retail investors because there are a lot of Singaporean retailers who are interested in Malaysian stocks. It will have repercussions on the retail participants and market liquidity.
"The new government would have to find ways and options to drive the market liquidity again," he said.
Both Pong and Nazri opined that the review would not have much impact on the local equity performance, at least, not in the immediate term.
MIDF research analyst Danial Razak agreed that the review was unlikely to have a huge impact on the underlying sentiment.
"Assuming that the trading link is to be scrapped, we do not think it will have a material impact on the overall sentiment," he said.
In a brief response to Bernama via email, the Securities Commission said it would provide the relevant information to assist the government in its review of the Bursa Malaysia-SGX Link.