Bursa Malaysia to expand new income streams

The exchange’s focus is not just about building solutions, but also about finding the needs, says CEO


BURSA Malaysia Bhd plans to expand and develop new income streams to grow its trading and non-trading revenues as the country’s equity market operator works to deliver a higher profit amid a depressed market.

CEO Datuk Muhamad Umar Swift (picture) said non-trading revenue (NTR) alone was accounted for 36% of the group’s revenue in 2019, while the balance was contributed by trading revenue.

“Unfortunately, trading revenue is market predominant. So if we have a bullish, volatile market, we’ll do very well. Now, what we want to do is to deliver a more diversified base.

“One of the areas we are looking at has to do with providing market-related information to clients, given Bursa Malaysia’s position as the golden source for data in the Malaysian market.

“The exchange is looking at how it can provide value-added information and solutions,” he said after Bursa Malaysia 2019 media briefing in Kuala Lumpur yesterday.

He also said presently, Bursa Malaysia’s focus is not just about building solutions, but also about finding the needs.

“We have conversations with daily users, brokers and investment banks on what kind of data they would like to see from the exchange and we will then fill that role.

“Exchanges develop in different ways. Some exchanges become solution providers, and others become quite involved in data provision.

“Another area of focus is the derivatives business which we are looking to expand its reach,” he added.

Muhamad Umar said the volatility in the market allows the group to introduce new products, adding that Bursa Malaysia will actively engage and bring in offshore market participants to improve the liquidity of the local market.

The local exchange is anticipating more intense volatility in both the securities and derivatives markets this year largely due to the ongoing US-China trade war and coronavirus outbreak.

Despite the sombre outlook, the stock exchange operator is anticipating 40 IPOs for the financial year 2020 (FY20).

“At this point, we have 16 companies across all three markets. But we are quite confident that we will have 40 listings, bearing in mind that we already did three listings this year.

“At the moment, we are looking at three listings for the Main Market, 10 for ACE Market and three for LEAP (Leading Entrepreneur Accelerator Platform) Market,” Muhamad Umar said.

For the full FY19, Bursa Malaysia’s net profit fell 17% to RM185.86 million from RM224.04 million recorded a year before. Revenue decreased to RM502.49 million from RM550 million in 2018.

The stock exchange operator said the decline was mainly contributed by lower operating revenue, which decreased 8% to RM480.1 million in FY19 compared to FY18.

Bursa Malaysia declared a final dividend of 10.4 sen per share for FY19, amounting to about RM84.1 million which is payable on Feb 28 this year.

Muhamad Umar said Malaysia continued to demonstrate longterm growth and offered compelling investment opportunities despite a relatively challenging year in 2019.

“Last year, the energy, construction and technology sectoral indices performed positively, growing by 51%, 34% and 29% respectively.

“In 2019, Bursa Malaysia ranked second in Asean for the number of listings. A testament to our strong fund-raising capabilities.

“The increase in our marketing and development expenses reflects our ongoing focus to maximise our reach and engagement more effectively.

“We are encouraged by the growing retail participation at 24.5% last year, a record high in the last five years,” he added.

For FY19, the securities market trading revenue fell by 12.4% to RM232.8 million from RM265.8 million in FY18, mainly due to lower average daily value (ADV).

Trading velocity decreased by four percentage points to 28% in FY19 compared to a year before.

Meanwhile, NTR for the securities market decreased by 1.2% to RM139.4 million in FY19 from RM143.7 million in the previous financial year.

Derivatives market trading revenue dropped by 5.8% to RM72.3 million in FY19 from RM76.7 million in FY18. As for the Islamic capital market, the ADV for Bursa Suq Al-Sila’ (BSAS) grew by 25.5% to RM30.6 billion in FY19 from RM24.3 billion in FY18.

Moving forward, the trading on BSAS is expected to sustain its growth momentum through further system improvements and continuous onboarding of new domestic and foreign participants onto its platform.