High volumes to lift Bursa Malaysia’s 4Q

Ample liquidity with retailers and active proprietary day traders continue to see active trading on the local exchange


BURSA Malaysia Bhd is expected to post a strong fourth quarter ended Dec 31, 2020 (4Q20), amid the sustained high trading volumes and values compared to 3Q20 when the exchange operator posted historic high earnings.

Ample liquidity with retailers and active proprietary day traders continue to see active trading on the local exchange, with an average 10 million securities exchanging hands last week despite the end of the loan moratorium at the end of September, leading some analysts to believe the company is set to post another strong quarter and year ahead.

“In theory, the 4Q should be a strong financial quarter as well for Bursa Malaysia on the strong volume, unless they make higher than expected payments (incentive payments/bonuses etc) as a result of the good market this year, which may heighten cost and lower profits,” Public Investment Bank Bhd head of research Ching Weng Jin said.

Affin Hwang Investment Bank Bhd analyst Tan Ei Leen expects a slower 4Q for Bursa Malaysia.

“In our view, the strong market rally seen in July and August tapered off in September, driven by profit-taking activities in line with the end of the loan moratorium period.

“In fact, we note the equity mar- ket’s average daily trading value (ADTV) is now hovering around RM4.4 billion in October compared to RM7.2 billion in August and RM5.5 billion in July 2020,” she said in a note in October.

She said based on the firm’s expectation of the equity market’s ADTV to hover around RM4.1 billion, while derivatives average daily contract volumes at 69,000 contracts in the 4Q20, it may potentially translate into a 4Q20 net profit of RM62 million.

Malacca Securities Sdn Bhd head of research Loui Low expects improving earnings of companies in 2021 on the back of a recovery in the economy will continue to encourage trading on the exchange.

“Results for the financial year 2020 (FY20) will generally be softer compared to last year, but FY21 should start to normalise and be better than FY20. In terms of share price performance, we believe investors are looking forward to FY21 earnings, hence explaining the surge or rebound in share price recently,” he told The Malaysian Reserve.

The share price of Bursa Malaysia has jumped by 83.63% or RM3.78 since closing at RM4.52 on March 24, 2020. The company has gained RM3.08 billion in market capitalisation in the seven-month period.

Hong Leong Investment Bank Bhd analyst Ng Jun Sheng said the stock, from a technical view, is likely to trend higher following the positive triangle breakout, with signs of institutional funds returning to participate more actively in the market and active average retail participation coupled with slower foreign outflows.

“Following the triangle breakout and positive indicators, we expect the stock to recapture the RM8.83 (100-day simple moving average) overhead resistance levels soon.

“A successful breakout will send the share price higher towards RM9.38 (50% FR) and our LT objective at RM9.77 (61.8% FR),” Ng said in a note last month.

Bursa Malaysia’s net profit more than doubled to RM121.93 million for 3Q20 compared to RM47.1 million last year due to improved performance on the securities and derivatives market.

Its quarterly revenue stood at RM237.74 million against RM122.67 million in 3Q19.

Investor participation in the securities market continued to increase, with ADTV growing by 101.8% to RM4 billion in the first nine months of 2020 (9M20) compared to RM2 billion in the same period last year.

As a result, securities trading revenue increased by 101.1% to RM349.2 million in 9M20 from RM173.6 million in 9M19.

The additional number of trading days and the higher effective clearing fee in 9M20 also contributed to the increase in trading revenue.