This article first appeared in The Edge Malaysia Weekly on January 29, 2024 - February 4, 2024

The market started with a bang in the first two weeks of 2024, with the promise of good things, only to be bogged down by the plunging share prices of several small and medium companies.

The recent selldown on the shares of 14 or so companies has everyone asking what can be done to prevent such a rout and raises concerns about what led to the selldown, which adversely affected the local stock market and sentiment.

A slew of theories abound but details explaining the episode are still scarce, with many traders spooked and wondering which counters could be next.

While stock exchange operator Bursa Malaysia has issued the affected companies with multiple unusual market activity (UMA) queries to seek clarification on what transpired, none have been forthcoming with information, which calls into question the effectiveness of UMA queries.

The regulators have assured investors that the authorities are closely monitoring market conditions and that the local stock market fundamentals remain strong.

It should be noted, however, that a whopping RM8 billion was wiped off the market in a matter of days. Assurances by Bursa and the Securities Commission Malaysia that the bleeding was not widespread, along with comments that RM8 billion is not substantial in the overall scheme of things, have done little to assuage the fears of stakeholders.

Looking ahead, what measures can be put in place to prevent such a rout or at least mitigate such an event?

In responding to the UMA queries, some companies have said their business remains intact even though their share price has been battered down. Yet, market fears remain unallayed, perhaps because the UMA queries address the company and not the shareholder.

In such cases, UMA queries alone are clearly insufficient.

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