The new shares market: regulatory intervention, forecast errors and challenges

A new issue is defined under Malaysian laws as the sale of unissued ordinary shares out of a previously closely held firm's authorised number of shares. Offers of existing issued shares are defined as sale of shares. Private placements, which are direct sale of unissued shares to designated investors, are permitted in limited cases and account for 5 to 10percent of funds per year in the market. Therefore, the phrase 'new issues' has a restricted meaning in this country, and is consistent with the meaning of initial public offerings (or IPOs) of private companies and government-linked enterprises

Price efficiency of stock index futures contracts: are there any arbitrage opportunities?

A futures contract is an agreement between a seller and a buyer that calls for the seller to deliver to the buyer a specified quantity and grade of an identified commodity, at a fixed time in the future, and at a price agreed in the contract. Stock index futures contract specify an equity index as the underlying asset. Arbitrage opportunity exists when the actual futures price deviates from the fair price by more than transactions costs. This study measures the arbitrage opportunities on the daily FKLI contracts price from calendar years 1996 through 1999. The pricing efficiency of the futures contracts was determined by the standard error between the closing actual and theoretical fair values for each month FKLI futures contract, where the theoretical value was estimated using the cost-of-carry model. The findings show that the actual futures prices do not converge towards theoretical prices with the passage of time. Arbitrage opportunities are related concepts. The fair price of a futures contract is determined by a pricing model that incorporates the value of the underlying cash asset, the time to expiration of the futures contract, the cost of financing the cash position, the cash inflows of the asset, and any special characteristics of the futures contract at expiration. In perfect markets - that is, when transactions costs and tax effects are not relevant - the actual futures price equals the fair price. Real futures markets are not perfect and there will always be opportunities to arbitrage the differences in the fair and actual prices of futures contracts and in the process aligning these prices, while earning arbitrage profits. The research issue addressed in this paper is whether arbitrage opportunities exists on the FKLI contracts and whether the futures market is price efficient over time

Audit committee reporting: current practices of companies listed on the Kuala Lumpur stock exchange (Bursa Malaysia)

This study examines the disclosures contained in Audit Committee Reports (ACRs) and the level of compliance of current practices with the amended Kuala Lumpur Stock Exchange listing requirements after the adoption of various recommendations made by the High-Level of Finance Committee on Corporate Governance and the Malaysian Code on Corporate Governance (MCCG) in 1999 and 2000 respectively. All firms listed on the KLSE’s main and second board, and MESDAQ counters were sampled. Consistent with the literature in developed markets, the findings reveal that very few companies provide more than what is expected by the ACRs in their listing requirements. Further, companies in finance, technology and IPC counters, and companies on the main board counter have greater initiative to provide value added (or termed as ‘non-boiler plate’) statements to information users

Auditing firm reputation, ex ante uncertainty and the underpricing of initial public offerings on the second board of the Kuala Lumpur Stock Exchange: 1990-1995

Reputable auditing firms have an incentive to investigate and report irregularities since their reputation is at stake, therefore engaging their services enables investors to estimate the value of the firm more precisely and reduce ex ante uncertainty. This will attract more investors to bid for the IPO shares and consequently IPOs attested by reputable auditing firms will have a lower premium level. This study tests the conjectured inverse effect of reputation of auditing firms on the level of IPO underpricing of 100 companies listed on the second board of the Kuala Lumpur Stock Exchange, for the period 1990-1995. The reputable auditing firms are the Big Six accounting firms; the others are classified as less reputable. The findings do not support this conjecture, which implies that Malaysian investors assume that all qualified and licensed auditing firms provide homogeneous services. However, the findings show that the underwriter reputation (UW) and the past profitability of the firm (NPM) variables are inversely related, whereas the market trend and the standard deviation variables are positively associated to the level of IPO underpricing

A survey of methods used by Malaysian brokerage firm investment analysts to appraise investments in ordinary shares

This study provides a broad description of the methods used by investment analysts attached to brokerage houses in Malaysia to appraise investments in the ordinary shares of companies. Fifty-seven investment analysts were sampled from all the brokerage houses in Malaysia and a mail questionnaire method was used to solicit the required information. The findings suggest that the sampled analysts used a combination of methods to assess the value of shares, though the emphasis is on the fundamental analysis. They use a three-year earnings forecast period, prefer accrual earnings to cashflows and use a variety of sources of information with the emphasis on financial information from audited financial statements. substantiated by qualitative information gathered through company visits. In general, though the findings are inconclusive regarding the most common methods used for share price valuation, the inclination is towards the earnings multiplier approach

Analisis pelaburan

Analisis pelaburan menghuraikan secara mudah dan terperinci segala konsep pelaburan yang perlu difahami oleh semua lapisan pelabur dan pelajar.Buku ini dapat membimbing pelabur memahami perkara-perkara penting dalam keputusan pelaburan dan menghuraikan konsep yang dibincangkan dengan contoh-contoh yang sesuai. Buku ini mengandungi 18 bab yang dimulai dengan pengenalan konsep-konsep asas pelaburan sehingga pelaburan di pasaran modal antarabangsa. Segala perbincangan konsep dijelaskan dengan menggunakan contoh-contoh dari pasaran kewangan tempatan. Buku ini merangkumi bidang analisis pelaburan secara komprehensif dan memenuhi keperluan kursus-kursus dalam bidang perniagaan, kewangan dan perakaunan peringkat ijazah di institusi pengajian tinggi tempatan

Analisis pelaburan

Analisis pelaburan menghuraikan secara mudah dan terperinci segala konsep pelaburan yang perlu difahami oleh semua lapisan pelabur dan pelajar.Buku ini dapat membimbing pelabur memahami perkara-perkara penting dalam keputusan pelaburan dan menghuraikan konsep yang dibincangkan dengan contoh-contoh yang sesuai. Buku ini mengandungi 18 bab yang dimulai dengan pengenalan konsep-konsep asas pelaburan sehingga pelaburan di pasaran modal antarabangsa. Segala perbincangan konsep dijelaskan dengan menggunakan contoh-contoh dari pasaran kewangan tempatan. Buku ini merangkumi bidang analisis pelaburan secara komprehensif dan memenuhi keperluan kursus-kursus dalam bidang perniagaan, kewangan dan perakaunan peringkat ijazah di institusi pengajian tinggi tempatan

Are cash flows relevant for stock pricing in Bursa Malaysia?

The research on whether information on cash flows have any impact beyond earnings disclosures has inconclusive results. Changes in cash flows are found to have significant impact beyond that of earnings only if share price changes are measured over a short window of about 3 days and not over a long window of say annual or 51 days windows. The results show that cash flow changes measured over one-year intervals did not affect share prices. This is also reconfirmed using the portfolio approach. To recapitulate, though cash flows appear to have no information content on share prices in the annual and medium windows tests, it does have information content in the short window tests with incremental information content beyond earnings, implying it has relevant value information though investors are more comfortable with earnings announcements for share price valuation. This finding reported from an emerging economy is consistent with evidence from developed markets

Sukuk securities and conventional bonds: evidence of significant differences

Sukuk securities have similar features with conventional bonds. The financial press has, however, inappropriately referred to Sukuk as Islamic bonds. This paper investigates sukuk securities empirically by first examining the yields to maturities of sukuk securities and conventional bonds of various issuers and maturities. Tests of differences in performance of the two classes of securities and Granger causality tests substantiate that these securities are different. This paper identifies some significant differences between the yield curves of sukuk securities and those of conventional bonds of the same issuers for the same term and rating. Results show significant differences between the average yields of sukuk and those of conventional bonds with the same quality and term issued by the same issuers from 2005 to 2012. Granger causality tests confirm that the yields of bonds do not Granger-cause the yields of sukuk, verifying no causality between the two. There is strong empirical evidence that the two types of debt instruments are not the same. This prompts re-examination of investment advisory and valuation methodology currently applied in the sukuk industry of 11 capital markets

Auditor change during listings: effect on IPO premiums

The study examined the relationship between choice of quality differentiated audit firm and initial return at listing. It is conjectured that the superior audit quality of Tier 1 audit firms helps to reduce ex-ante uncertainty and consequently reduces the initial premiums at listing. The findings show that there is an inclination for listed firms to engage Tier 1 audit firms, and no significant difference in the initial returns of IPOs firms audited by either Tier 1 or Non-Tier 1 audit firms were observed. However, higher significant initial returns for new issues were observed for Second Board firms relative to Main Board firms. The findings do not appear to suggest that the auditor reputation is a determinant of initial returns at listing. The findings are consistent with those documented by Shamsher and Annuar (1997) that investors are indifferent to the quality of audit service provided by Tier 1 and Non-Tier 1 audit firms