Bursa posts record gains on jump in retail traders

by ASILA JALIL / pic by BLOOMBERG

BURSA Malaysia Bhd will not experience the same level of volatility seen in foreign markets, due to retail versus institutional trades triggered on trading apps and community forums and the exchange does not plan to bar short selling.

Commenting on the recent BursaBets initiative by a group of anonymous retail investors in a subreddit, the exchange operator’s CEO Datuk Muhamad Umar Swift said what had happened in the US would not occur in Malaysia as what transpired for the US-based gaming company, GameStop Corp, was a result of a “series of unique events” that allow for a short squeeze.

“Malaysian market is very different from the US. We have controls in place regarding the maximum level of regulated short selling (RSS), which is at 3%.

“Therefore, with those controls in place, what we are seeing is, it is well controlled and we will not be looking at banning RSS at this point because it is performing as it is meant to be,” he said.

Bursa Malaysia posted a 103% rise in net profit for the financial year ended Dec 31, 2020 (FY20), to RM377.75 million due to the improved performance in the securities and derivatives market.

The segment saw higher operating revenue by 62.2% to RM778.8 million from RM480.1 million in FY19.

The amount achieved is Bursa’s highest full-year financial results since its listing in 2015.

Revenue for the year jumped 59% year-on-year to RM798.97 million on the back of higher trading revenue for the securities and derivatives market.

The board approved and declared a final dividend of 26 sen per share and a special dividend of eight sen per share for FY20. This brings the total dividend payout for last year to 51 sen per share versus 20.8 sen per share paid in FY19.

For the quarter, the bourse’s net profit rose 130.2% to RM104.85 million in the fourth quarter of 2020 (4Q20) from RM45.56 million in 4Q19.

Revenue increased 78.4% to RM230.7 million from RM129.33 million in 4Q19.

Bursa saw a rise in retail participation last year, where the retail average daily trading value (ADV) increased 236% to 1.6 billion, the highest retail ADV in its history.

About 64% of the total Central Depository System accounts opened last year were by millennials aged 26 to 45 years old.

“Retail investors clearly are driving the market to a large extent and domestic institutions.

“As we go forward, we want to see the re-emergence of foreign institutional investors as well, and so we will be engaging all parties on that,” said Muhamad Umar.

He said the group is also working on providing a conducive environment to allow retail participants to invest with confidence and take it forward this year.

The FTSE Bursa Malaysia KLCI also ended the year higher at 1,627 last year from 1,589 in FY19.

Market data revenue increased 24.8% to RM48.1 million in FY20 compared to RM38.6 million in FY19 contributed by the increase in the number of new subscribers.

The securities market registered a trading revenue of RM498.9 million, an increase of 114.3% from RM232.8 million in FY19 due to higher ADV for the securities market’s on-market trades.

Derivatives market trading revenue rose by 26% to RM91.1 million in FY20 from RM72.3 million the year prior due to the higher number of contracts traded for crude palm oil futures and FBM KLCI Futures.

Muhamad Umar said the group plans to include public listed companies to join in on the environmental, social and corporate governance (ESG) journey.

He said there are currently 76 companies that are qualified for the Bursa FTSE4Good Index which he said is the measure for ESG compliance in a company.

Bursa had also been in talks with Employees Provident Fund CEO Tunku Alizakri Raja Muhammad Alias and members of the investing community on the matter.

“We at the exchange want to help companies in the journey to sustainability and to that end we have Bursa sustain, a director of sustainability who will be working with institutional investors’ council to actually define what is it that inventors are looking for.

“We are also looking to standardise ESG data. There are two elements to it, one is to provide it in an easy, readable form and the other is looking at the assurance around it.”

Muhamad Umar said that the local exchange is looking at 30 IPOs this year.

Read our earlier report