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Malaysia suspends some short selling as coronavirus batters markets

March 25, 2020

Malaysia has temporarily banned short-selling, the latest Asian country to take the action in a bid to stem volatility in their markets as global stocks are battered by the coronavirus pandemic.

The suspension, which starts immediately and lasts until April 30, covers intraday and restricted short-selling. This is where investors usually hedge their positions or make money by selling borrowed securities and buying them back later at a cheaper price.

The ban does not apply to permitted short-selling, Securities Commission Malaysia (SC) and Bursa Malaysia say in a statement on March 23.

Permitted short-selling typically refers to short-selling of the securities underlying exchange-traded funds (ETFs), which are carried out by market makers.

"This suspension is introduced as part of the regulators' proactive measures to mitigate potential risks arising from heightened volatility and global uncertainties," the statement says. Other measures include a waiver of the SC’s annual licensing fee for 2020, and a previously announced one-year waiver of listing fees.

The SC did not specify why permitted short-selling is allowed.

According to an official from Bursa Malaysia, the exemption was mainly for the benefit of ETF market makers.

"This is to ensure the trading of ETF remains smooth," the official tells Asia Asset Management, speaking on condition of anonymity.

SC Chairman Syed Zaid Albar says in the statement that regulators will continue to keep watch on trading activities in “this exceptionally volatile global and market environment” and “assess the situation and consider necessary additional precautionary measures, as appropriate, to support an orderly market”.

Bursa Malaysia Chief Executive Officer Muhamad Umar Swift adds that the suspension is a short-term measure aimed at providing stability and confidence to the market.

Other Asian countries that have taken similar action include Indonesia, Taiwan and Thailand.

Malaysia has the most cases of Covid-19, the disease caused by the coronavirus, in Southeast Asia and the fourth highest in Asia.

As at March 23, Malaysia reported 1,518 cases and 14 deaths.