I have been a strong advocate of the trading link between the Singapore Exchange and Bursa Malaysia because it brings the two countries closer together, it fosters economic cooperation and it will likely add liquidity to both markets. It is heartening to read that they're finally getting it together. But while I hold firm to these points, it is merely stating the obvious that the trading link has been delayed so often that retail investors could be forgiven for thinking it will never happen. And now one wonders whether it actually should.

The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.

The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.

Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.

If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.

Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.


Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.

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Labels: Bursa Malaysia, SGX, Singapore Exchange, trading link