Trading volume on Bursa Malaysia to fall in the near term

ADTV had weakened to RM3.4b on average from June till July 8, compared to RM4.2b and RM4b average in April and May respectively


BURSA Malaysia Bhd’s average daily trading volumes (ADTV), which have steadily declined over the past trading days, could remain weak over the near term, before picking up towards the end of 2021 in anticipation of a rebound in economic activities next year, according to Maybank Investment Bank Bhd (Maybank IB).

The investment bank noted it had lowered ADTV expectations for Bursa Malaysia and cut its net profit forecast of Bursa Malaysia for financial year 2021 (FY21), FY22 and FY23 by 15%, 20% and 20% respectively.

It also lowered the target price (TP) of the exchange operator by 20% to RM8.70 from the previous TP of RM10.75. Bursa Malaysia closed at RM7.70 yesterday.

Maybank IB added ADTV had weakened to RM3.4 billion on average from June till July 8, compared to RM4.2 billion and RM4 billion average in April and May respectively.

“This was likely due to concerns over the macro impact of the lockdowns and political uncertainties.

“The pullback was across all investor segments as retail, domestic institutions and foreign participation were still at 39%, 44% and 17% respectively in June until July 8, similar to January to May 2021,” it said in a note yesterday.

The investment bank added derivative contract volumes on Bursa Malaysia surged in June to 1.94 million contracts (contributed by Crude Palm Oil Futures), lifting second quarter volume to 4.79 million contracts (20% higher year-on-year (YoY), 1% lower quarter-on-quarter) and first-half volume to 9.61 million contracts (2% higher YoY).

Maybank IB noted its earlier RM4.5 billion ADTV forecast for 2021 is no longer realistic and has thus lowered it to RM3.8 billion, which implies RM3.2 billion ADTV in the second half of 2021.

“We also lower 2022 estimated ADTV to RM3.7 billion (from RM4.6 billion), expecting sentiment to improve as economic activities rebound after 80% of the population is vaccinated by the end of 2021.

“Alongside our earnings cut, we also lowered our dividend per share forecast, assuming a 91% to 92% dividend payout ratio,” it added.

Maybank IB pointed out that there was potential for higher dividends from Bursa Malaysia with cash reserves building up.

Between early March until the end of May, Bursa sold a total of 50,000 CME Group shares (CME US, CP: US$209.62, not rated) in the open market for US$10.9 million (RM44.9 million).

Maybank IB noted at an investment cost of US$3.3 million back in November 2009, the CME share sale gain will add onto Bursa’s FY21 profit, potentially enabling higher dividend to its shareholders (the RM44.9 million proceeds is equivalent to 5.6sen/Bursa share).

Bursa still has 140,250 CME shares which are worth US$29.4 million (15.2 sen/Bursa share) yesterday.