Rising volume to boost Bursa Malaysia earnings
PETALING JAYA: Bursa Malaysia will likely register improved earnings this year due to the surge in trading volume on the local equity market.

This, in turn, is expected to lift investor sentiment on Bursa Malaysia, implying some upside potential for the company.

Bursa Malaysia’s shares gained 1.8%, or 14 sen, to close at RM7.91 yesterday.

MIDF Research, which reiterated its “buy” call on Bursa Malaysia, said there were good prospects for trading activities in the local stock market this year from the corporate earnings and valuations perspective.

“We expect robust economic growth, and hence corporate earnings.

“We also expect that the expectations of US rate cuts will lead to positive sentiment, especially among foreign investors, and this will drive better market valuations,” it said in a report.

MIDF Research pegged its target price for Bursa Malaysia at RM8.20 a share based on 25 times forward earnings. This represented a marginal upside of 3.7%.

The research firm noted that trading activities year-to-date had improved significantly, with volume having surpassed the 2022 and 2023 levels, on expectations of US interest rate cuts.

As at May 7 this year, Bursa Malaysia registered an average daily volume of 4.19 billion shares year-to-date, representing an increase of 28.7% year-on-year.

“Since the reopening of the economy, retail investors’ participation has normalised.

“Therefore, we are positive of the latest milestone reached for the market and we expect this will translate to better earnings for Bursa Malaysia,” MIDF Research said.

In addition, it said, Malaysian stocks reached a milestone, hitting RM2 trillion in market capitalisation for the first time ever on Tuesday, thanks to broad gains in blue-chip stocks and a slew of new listings.

The FBM KLCI also closed above the 1,600-point level for the first time in two years, settling at 1,605.68 on Tuesday.

Year-to-date, this represented a gain of 10.4%, making it the best-performing index in Asean thus far, MIDF Research noted.

“We are sanguine on the prospect of foreign funds returning to the Malaysian market on the back of US rate cuts and subsequent expectation of US dollar to weaken in light of this,” it said.

Overall, MIDF Research said Bursa Malaysia was well-positioned to continue developing the marketplace and making further progress of its strategic plans, citing the exchange was transitioning into a multi-asset platform.

For instance, the stock exchange operator launched the Bursa Malaysia Dalian Commodity Exchange Soybean Oil Futures and Bursa Gold Dinar and SME X Platform, among others, in the first quarter of this year.

For its core business, there were a total of nine initial public offerings and the listing of the first business trust.

“We expect these initiatives to result in Bursa Malaysia enhancing its trading platform and hence its attractiveness,” MIDF Research said, adding that the impact would likely be felt in the medium to longer term.

“In the short term though, the ongoing global and local developments will continue to influence the volatility and performance of the securities and derivatives markets, which at current juncture, are sanguine,” it said.
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Bursa Malaysia will likely register improved earnings this year due to the surge in trading volume on the local equity market.