Bursa likely to post better earnings in 3Q

PETALING JAYA: Bursa Malaysia Bhd is expected to post improved earnings for its third quarter ended Sept 30, 2023 (3Q23) on the back of recovery in equity trading value during the period.

Affin Hwang Investment Bank (IB) Research said in a report the stock market’s average daily value (ADV) has improved to RM2.27bil in 3Q23, up from RM1.72bil in 3Q22 and RM1.9bil in 2Q23.

This improved ADV was attributed to the recovery in trading interest, driven by global market recovery and new thematic drivers such as the launch of the National Energy Transition Roadmap, renewable energy plays, optimism in the rollout of construction projects and the Johor investment theme.

The research house noted that derivative trades on Bursa Malaysia decreased to 4.5 million, which is 10.7% lower compared to the same period last year and 1.4% lower than the previous quarter.

The decline is mainly because traders moved their attention away from crude palm oil futures, which saw a 13.4% year-on-year (y-o-y) decrease and a 3.8% quarter-on-quarter (q-o-q) dip.

Instead, it said investors were more focused on FBM KLCI futures, which experienced a 5.6% y-o-y rise and 13.3% q-o-q increase.

Affin Hwang IB Research believed this shift in trading reflects a positive sentiment in the stock market.

Based on these data, it expected Bursa Malaysia to report a core net profit of RM59mil in 3Q23, a 5.7% q-o-q improvement and 17.7% y-o-y growth.

Moving forward, the research house believed that investor optimism, which was fuelled by a recovery in global sentiment and the reinstatement of equity trading stamp duty rate to 0.1% from 0.15% from July 1 onwards, may not hold going into 4Q23.

“While we also do not see many positive drivers from the recently announced Budget 2024 to excite investors, we note that rising tensions in the Middle East, geopolitical uncertainties and the reality of a recession in 2024 may cause a higher level of risk-aversion,” it noted.

As such, Affin Hwang IB Research believed it may be a challenge for the overall Malaysian equity market to trade at a higher price-to-earnings multiple and for initial public offerings (IPOs) to fetch higher valuations.

It, however, believed that the introduction of capital gains tax in Budget 2024 for the disposal of unlisted shares – but with exemptions granted for cases such as IPOs, internal restructuring and venture-capitalists – could be a way to stimulate vibrancy on the local exchange.

The research firm has reiterated a “sell” call on Bursa Malaysia, with an unchanged target price of RM6.08 a share.

Bursa Malaysia is slated to announce its 3Q23 results on Oct 31.