HLIB Research said the local bourse could attract more liquidity from foreign investors as their shareholding of securities remains low at present at 19.6%.
PETALING JAYA: Bursa Malaysia Bhd
stands to benefit from the increased trading of securities as well as growth in its non-trading business.
HLIB Research noted that the exchange operator could see its average daily value (ADV) of securities traded rise to a post Covid-19 pandemic high of RM2.7bil (up 33% year-on-year) helped by upbeat domestic economic fundamentals, buying by foreign investors and liquidity following the proposed privatisation of Malaysia Airports Holdings Bhd (MAHB).
The ADV has staged a strong resurgence year-to-date to RM3.02bil, up 46.9% versus financial year 2023 (FY23) of RM2.06bil.
The ADV for FY24 is set to stage a post pandemic high of RM2.73bil (up 33% y-o-y), and even surpassing its pre-pandemic peak of RM2.39bil (FY18), according to the research house in its report.
It added that sentiment on the local exchange had improved with many investors appearing to have brushed aside the delayed pivot in interest rates by the US Federal Reserve (Fed).
The research house said the local bourse could attract more liquidity from foreign investors as their shareholding of securities remains low at present at 19.6%.
HLIB Research estimated this segment of investors could bring in RM20bil if they were to move from being “underweight” to “market weight” on Bursa, which could happen once the pivot by the Fed which is anticipated to occur this December.
Meanwhile, the MAHB takeover could see the redeployment of up to RM12.4bil of funds back into the local equity market and support trading activity in the final quarter of the year.
HLIB Research said Bursa’s non-trading revenue (NTR) has been growing steadily from RM161mil in FY19 to RM219m in FY23, representing an increase of 36% and compound annual growth rate of 8%.
“Management targets to grow NTR by 5% to 7% this year, which we reckon is doable (our forecast is at 5.4% (1Q24: 12.1%),” it stated.
HLIB Research has raised Bursa’s FY24, FY25 and FY26 earnings by 10%, 8% and 8%, respectively, on higher assumptions for trading values and NTR but partly offset by higher operational expenture.
It has upgraded Bursa to “buy” from “hold” and put a target price of RM9.15 a share on the company based on 26 times its FY24 price earnings multiple.
