Mesdaq: What now?

Unlike the earlier injection of sky-high confidence exhibited by Mesdaq officials in August during the run-up to the long-awaited listing of Intelligent Edge under the Exchange's new RM3.5 million MORE trading system, things this time around during the IPO exercise were a little more low-key by nature.

Such an atmosphere was understandably inevitable especially after Intelligent Edge's share price consistently dipped below the issue price of RM1.50 per share after its listing on August 2. Trading was termed as lackluster by many brokers and remisiers in town. Mesdaq officials at that time, scrambled to conduct damage control after several not-so-favorable news reports.

Its executive chairman Khairil Anuar Abdullah in a hastily convened press conference in August, defended the exchange's new trading system, claiming the stock's price movements were largely determined by market sentiment. The public, he pointed out, should not judge Mesdaq by the first day of trading. The country after all, was in the throes of recovering from the economic wounds of the recent past.

Fair comment, but the Malaysian stock market scenario, which has always been about share prices and how to boost it to high levels during the pre-economic crisis years, is now seen as ridiculous and devoid of any firm fundamentals. The share price of a stock is king in this country. Sad to say but it is true. Nothing makes a punter happier than to make quick profits at the expense of long-term gain. Mesdaq in its bid to "sell" the exchange seems to have promised a lot more than it could deliver. It could end up as the unwanted child, with no family to call its own.

A local cyberpreneur who started up his very own Internet venture that is now beginning to bear fruit, says there was so much expectations for the Intelligent Edge listing. It was going to be the first Mesdaq listing for the year and only the second since April 1999. "But there were so few shares in the market as most of the shares was in private placement--this of course, drove liquidity down." The "dismal performance", as he calls it, dampened enthusiasm. Coupled with a rather sluggish stock market and market whisperings of larger economic hurdles in the horizon, has not made the new technology exchange a delicious prospect by a long shot.

Now, there are rumblings about the Kuala Lumpur Stock Exchange (KLSE) taking over the reins at Mesdaq, effectively absorbing the tech index into the KLSE's realm of operations. In a recent Malaysia.CNET.com interview with Khairil Anuar, he basically intimated that the KLSE has a lot of say in how Mesdaq is run. Several questions put to him about what Mesdaq is going to do to improve investor confidence in it, ended with him saying negotiations were being carried out with the KLSE; no elaborations of any kind, giving the impression that things can only get going once the KLSE gives the thumbs up. Then, in another press event a few days later, Khairil Anuar said "anything is possible" when asked about a possible merger between the KLSE and Mesdaq. Is a merger of some sort on the cards?

One possibility how this could take place is by getting Mesdaq to replace the KLSE's Second Board as the tech arm of the Malaysian stock exchange. A fund manager points out this scenario could pull Mesdaq out of the doldrums. With a few Second Board counters making the migration to the First Board, he says there is a lack of attractive counters on the Second Board for investors, retail and institutional alike. "The original of the Second Board was to help budding new companies but it has lost its direction." Mesdaq, he says, has the right philosophy behind it but has not quite been the "hot stuff" people were predicting it would be in 1997.

So, why don't the authorities just merge the two together? Such a move could give local tech stocks a shot in the arm as the country's 6,000 brokers and remisiers would have access to these stocks, unlike the current situation where only a handful of dealers even bother with Mesdaq counters due to the fact that the existing three counters are not displayed on the main KLSE terminals, thus resulting in very thin trading. Being under the KLSE umbrella, could help improve trading volumes on tech stocks by a significant bit in better economic times.

In the context of the larger picture though, more pro-active measures need to be taken to jumpstart the Internet Economy in the country. Only by initiating such steps, could the Mesdaq or whichever entity appears to replace the former if the tech exchange is absorbed by the KLSE, be a viable exchange. Khairil Anuar likes to say that the Mesdaq could not be expected to be a star overnight as the Nasdaq took 15 years to reach such a pinnacle. What is at stake here is the country's Net Economy dreams. Malaysia let alone Mesdaq, does not have the luxury of time. The clock is ticking. If a KLSE takeover of Mesdaq can help matters, then so be it.