PETALING JAYA: The Bumiputera Equity Safety Net (ESN) mechanism does not diminish the value of shares nor does it affect non-Bumiputera shareholders and investors, say economists.
International Islamic University Malaysia economics professor Ahamed Kameel Mydin Meera said the Bumiputera ESN is essentially an affirmative action policy to increase Bumiputera equity.
“The value of shares is determined by the future expected cash flows of companies. and sometimes due to manipulation by speculators, not by those who hold them,” he said.
He was commenting on Prime Minister Ismail Sabri Yaakob’s recent announcement that the government is reviewing the Bumiputera ESN mechanism to achieve Bumiputera equity and value, which is still below the 30% target.
Ahamed said the best way to achieve Bumiputera equity and value is by increasing financial literacy among the Bumiputeras through education and experience.
“With good skills in financial management, the Bumiputera ESN would no longer be necessary,” he said.
Geoffrey Williams of the Malaysia University of Science and Technology said it will be tempting to think that restricting the market will lower share prices but within the Bumiputera ESN, the share price will reflect fundamentals.
“With ESN, there is potentially less market risk and it can provide protection and stability for long-term responsible investors,” he said.
As for claims that Bumiputera shareholders would sell their shares for a quick profit, Williams said there is no definitive evidence that Bumiputera investors behave differently from others when given profit-taking opportunities in conventional markets.
“The aim of achieving 30% Bumiputera equity has very little to no rationale and is an arbitrary target that can be easily missed,” he said. - FMT
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