Evolution of the Bursa Malaysia


Growth of Stock Loans in Kuala Lumpur

In the 18th century Great Britain established colonies and protectorates in what is now Malaysia and Singapore.  The national day of independence is August 31, 1957.  The nation of Malaysia, as we know it today, is a relatively new country, taking its current configuration in 1965.  Malaysia has a population of over 28 million people.

Malaysia is a federal constitutional monarchy, nominally headed by a “paramount Ruler”, also referred to as the King.  Its legal system is based on English common law, Islamic law and customary law.

Malaysia is continually attempting to improving and advancing its business climate.  This is most evident in its modest currency control regulations.  Non-residents have no restriction with regards to the purchasing of ringgit (national currency) based assets, stocks, land or securities.  The profits or divestments proceeds, in foreign currency, are freely transferable.

The Kuala Lumpur Stock Exchange was renamed and rebranded the Bursa Malaysia Berhad on April 14, 2004.  In March of 2005 the Bursa Malaysia Berhad had an IPO of 166 million shares at a price of 3 Malaysian Ringgit (MYR).  It has a market cap of over 3.3 billion MYR.  The Malaysian exchange is now referred to as the MYX.

In 2009, in an effort to improve its derivatives function and to help garner more worldwide acceptance, the Bursa Malaysia Berhad entered into a strategic partnership with the Chicago Mercantile Exchange (“CME”) the CME holds a 25% equity interest in Bursa Malaysia Derivatives Berhad and the Bursa Malaysia Berhad owns the remaining 75%.

Although the Malaysian economy is growing, capital remains tight with many banks reducing the amount of money they are willing to lend to major shareholders and listed companies in Kuala Lumpur.

Squadron Holdings, Ltd provides a reliable solution in the form of a stock loan for shareholders who own stock in listed companies which trade on the MYX.  Shareholders in Malaysia can now pledge their securities and borrower against their stock.  Squadron Holdings stock loan program offers borrowers an opportunity to raise cash without having to sell their stock into the market.

Malaysian borrowers who pledge securities for a stock loan will enter into a share financing agreement with Squadron Holdings.  The loan agreement is non-recourse which means that the pledged shares are the sole collateral for the stock loan.  There is no need for cumbersome due diligence, personal guarantees or expensive audited financial reports.  Squadron Holdings, Ltd will provide a loan agreement with a favorable LTV (Loan to Value Ratio) often as high as 70% and will outline other conditions for the stock loan such as the loan term (length of time for the loan), the interest rate and other provisions for the pledged stock.

Stock loan proceeds are not restricted to use in Malaysia.  Funds may be used for a variety of purposes such as purchasing other securities worldwide, global real estate investments, personal purposes and/or reinvestment back into the listed company.

As a whole the forecast for the Asian economy is negative, this is due mainly to the euro zone debt crisis and the corresponding volatile political situation.  This is hurting the region’s outlook; Malaysia is not exempt from this pain. Nonetheless, Bank Negara governor Tan Sri Zeti Akhtar Aziz forecast that “the gross domestic product (GDP) growth will be between 3% to 5% for 2012”.

At Squadron Holdings, Ltd our primary business is stock lending. If you are a major shareholder or listed company and own stock which trades on the MYX in Kuala Lumpur, Malaysia and wish to borrow against your stock by pledging your shares Squadron Holdings, Ltd can help. Your customized stock loan will be funded promptly and securely with an emphasis on confidentiality.  Additionally, as a foreign lender Squadron Holdings, Ltd does not have reporting requirements on our lending activities in Malaysia. Our loan program provides favorable terms and interest rates; brokers and financial advisors are always welcome.