Bursa volumes expected to rise on bullish 2H19

According to its CEO, there are various positive indicators that provide reasons to be optimistic

by DASHVEENJIT KAUR / pic by ARIF KARTONO

BURSA Malaysia Bhd had a weak second quarter (2Q) with trading volumes of securities and derivative contracts falling, but it forecast that a bull market in the remaining part of the year and pending new listings will drive up trading volumes.

The local equity market slumped in the first half of the year (1H19), but is set to enter a bull market as it embraces a better 2H19.

Bursa CEO Datuk Muhamad Umar Swift (picture) said he is optimistic about the last six months of the year, given the return of foreign investors recently.

“The market has bottomed out and I think it’s a great time for investment. We are also seeing improvements in foreign direct investments and these are all good opportunities for us to build upon,” he told reporters during Bursa’s 1H19 media briefing in Kuala Lumpur yesterday.

He emphasised that bulls and bears alike had plenty of factors to marshal in their favour during the first six months of the year.

“Our markets performed in line with expectations as investors continued to adopt a cautious stance for 1H19.

“Notwithstanding the challenging operating environment, we will forge

ahead to build on our strengths such as in the Islamic capital market, which continues to show a positive momentum,” he added.

Muhamad Umar said there are various positive indicators that provide reasons to be optimistic, among which are the positive trend in trading among smalland mid-cap counters and the encouraging increase in initial public offerings (IPOs) which led to the exchange occupying the top spot among major Asean bourses in terms of funds raised via IPOs as at 1H19 totalling RM1.4 billion.

He said there are 13 approved IPOs pending listing in the pipeline, with three coming to the Main Board, seven in the ACE Market and another three on the Leading Entrepreneur Accelerator Platform Market.

“The 13 IPOs make up RM15 billion in market capitalisation,” Muhamad Umar said.

On its financial results for 2Q ended June 30, 2019, Bursa’s net profit fell 20.4% year-on-year (YoY) to RM46.34 million due to lower operating revenue across both the securities and derivatives market.

The drop in net profit was for the fifth straight quarter and resulted in a lower earnings per share of 5.7 sen for 2Q compared to 7.2 sen a year ago.

Quarterly revenue dropped 11.8% YoY to RM123.96 million due to lower volumes traded on the exchanges.

For 1H19, the stock market operator recorded a 23.6% YoY fall in net profit to RM93.2 million as operating revenue dipped by 14% YoY to RM240 million.

Total operating expenses in the first six months of the year saw a marginal decrease by 0.7% to RM122.6 million

from RM123.4 million in 1H18. Trading revenue decreased by 19.6% YoY to RM117.8 million in 1H19 due to

lower average daily value (ADV) for the securities market’s on-market trades.

The total non-trading revenue decreased by 5.9% YoY to RM81.3 million in 1H19 from RM86.4 million a year ago — mainly due to the decline in listing and issuer services revenue from lower initial and annual listing fees, as well as lower perusal and processing fees.

This was partially offset by higher market data revenue over the increase in subscriptions.

“Despite these external headwinds, the securities market performance for 2H19 is expected to be resilient. The month of June 2019 saw foreign investors turn net buyers in the securities market, with the trend continuing into July 2019,” he added.

The derivatives market trading revenue decreased by 14.1% YoY to RM33.3 million in 1H19, mainly due to the lower number of contracts traded for crude palm oil futures and FTSE Bursa Malaysia KLCI futures.

As for the Islamic capital market, trading revenue for Bursa Suq Al-Sila’ (BSAS) in 1H19 increased by 2.5% to RM7.6 million from RM7.4 million in 1H18, the exchange operator noted in its exchange filing yesterday.

ADV for BSAS grew by 49.8% to RM32.1 billion from RM21.4 billion in the corresponding period last year.

“Trading on BSAS is expected to sustain its strong performance through expansion of its global reach and the on-boarding of new domestic nonbank participants onto its platform,” Muhamad Umar said.