In the past, fund managers were observed to have “window-dressed” their portfolios by closing their core stocks at a higher level for the year-end.
They did this by bidding for these stocks at higher prices in the minutes just before trading closed at 5pm.
However, under BTS, which was launched yesterday, the theoretical closing price (TCP) would be calculated during the pre-closing period between 4.45pm and 4.50pm
Trading done in the final 10 minutes of the market will be based on the TCP.
Bursa Malaysia chief market operations officer Devanesan Evanson said the pre-closing phase would minimise undue price volatility created by last minute orders.
It made trading more efficient and accessible for investors, he said, adding that it would also allow investors to better gauge market sentiment and prices.
A local fund manager said it would require “more effort” to window-dress but this also meant that prices of stocks would be more reflective of demand and supply.
“It will reduce window-dressing activities and the abuse of such practices. Having said that, window-dressing activities are traditionally done on a handful of days of the year,” he said.
A remisier with a bank-backed brokerage said fund managers would have to buy large quantities of shares if they were to window-dress their portfolio under BTS.
“Last time, they could just do it by buying (fewer) shares, like 100 lots. Now, they would have to spend more because they have to boost the volume, especially for high liquidity stocks,” he said.
He said BTS was beneficial to the market as stocks would be free from price manipulation.
“It also puts us back into standard practice with regional bourses like Singapore, Hong Kong and Thailand, which use a similar platform,” he added.
However, the remisier does not expect much window-dressing activities this month as he believes most fund managers have already closed their books.
Hwang-DBS Vickers Research agreed, saying there was a low probability of the traditional year-end window-dressing activities happening this time around due to the poor performance of Bursa Malaysia this year.
“It will perhaps make a bit more sense for portfolio managers to start afresh from a lower base for the subsequent year than to prop up their battered fund performance in an already ugly year,” the research house said.
By YEOW POOI LING