Bursa cautioned that the performance and the volatility of the securities market would be influenced by a number of factors.
PETALING JAYA: Bursa Malaysia’s outlook appears bright following strong results for the third quarter ended Sept 30, 2024 (3Q24).
But analysts expect moderate trading activities in the fourth quarter in tandem with the year-end holiday period.
According to Bank Islam Malaysia Bhd (BIMB) Research, the stock exchange operator’s total average daily trading value (ADTV) reached RM3.8bil in 3Q24, improving 70% y-o-y from RM2.2bil in 3Q23, while market velocity rebounded to 43%.
It remained hopeful about stronger y-o-y earnings growth for Bursa in 4Q24, although it anticipated slower quarterly growth.
BIMB Research has placed a target price of RM11.10 on Bursa.
Similarly, Rakuten Trade head of equity sales Vincent Lau also expected trading volume to dip cyclically towards the end of the year as investors, including fund managers go on their year-end leave.
However, he said the uncertainty stemming from the US presidential election would disperse once a new president is named.
Lau said the hesitation from the situation in the United States could also be the reason why the initial public offering (IPO) scene, while still vibrant, has tapered off marginally in terms of the opening share price premiums for the companies involved, as investors adopt a “wait-and-see” stance.
“However, the conclusion of the US presidential election will give rise to a recovery in trading volume, especially once we move into 2025, which would be enhanced by the bourse’s own target of listing 50 IPOs next year,” he told StarBiz,
Lau maintained a positive outlook for the stock and anticipated more upside from current levels.
Bursa saw its net profit balloon by 41.9% year-on-year (y-o-y) to RM85.7mil, boosted by a revenue that grew 33.1% to RM211.3mil.
For the nine months ended Sept 30, 2024 (9M24), net earnings escalated 25% to RM241.2mil, driven by a 30.1% rise in turnover to RM598.4mil.
Bursa said in its filings that the year-to-September strong showing was mainly due to a 39.1% surge in operating revenue from the securities market to RM411.8mil, up from RM296mil a year ago.
“The securities market saw a 52.9% y-o-y increase in trading revenue, reaching RM300.3mill in 9M24 compared with RM196.4mil a year ago.
“This growth was due to a higher ADTV for on-market trades and direct business transactions, which increased by 69.6% to RM3.6bil in 9M24 from RM2.1bil in 9M23,” it said.
It reported that trading velocity improved by 13 percentage points to 42% in 9M24, noting that the two additional trading days in the first nine months of 2024 compared to the same period of last year also contributed to the rise in trading revenue.
In a statement, chief executive officer Datuk Muhamad Umar Swift said Bursa is optimistic about meeting all five headline key performance indicators or KPIs, including the pre-tax profit target that had been revised upwards in July 2024.
The stock exchange operator said the country’s economic growth forecast for the year has been raised to 4.8% from 4.4%, while the World Bank is projecting Malaysia’s growth to touch 4.9% this year, propelled by robust domestic demand and a recovery in exports.
However, Bursa cautioned that the performance and the volatility of the securities market would be influenced by a number of factors, including global developments such as the monetary policy shifts in advanced economies, China’s stimulus measures, geopolitical tensions, the outcome of the US presidential election and the performance of the ringgit.
Meanwhile, in a note published in the first week of October, Kenanga Research said returning foreign participation, multi-year projects, a stronger ringgit heading to position with net beneficiaries, and post-Budget 2025 clarity should keep investment markets buoyant.
The research house said Bursa’s 3Q24 performance was fuelled by continued thematic plays from data centre developments and their beneficiaries, state-driven prospects such as in Johor and Sarawak, as well as foreign investors flowing back into Malaysian equities in favour of a stable interest rate environment amid regional monetary policy easing.
“We reckon the aforementioned prospects will carry on for the rest of the year, particularly with expectations that further interest rate cuts would fuel further crowding into the local bourse,” it pointed out.
The research house added that investors might position themselves with net importers that are slated to see cost savings in the coming quarters on the backdrop of the ringgit’s appreciation.
Kenanga Research said the IPO scene could be stimulated by the more robust trading environment and participation which could encourage corporates into hoping that fairer valuations could be met.
Meanwhile, it was reported that Bursa is considering a formalised framework where listed companies might be given fundamentals targets on measures such as valuations, return on equity and liquidity as a bid to improve the overall quality of local equities to better attract investors.Keeping its “market perform” call on the stock, Kenanga Research said its unchanged target price of RM10 is based on an unchanged 25 times price-earnings ratio on a forecast earnings per share of 40.1 sen, which is in line with Bursa’s global financial exchange peers’ average that have also seen appreciation in valuations.
It said current valuations are also reflective of similar sentiment in line with heightened trading activities.
