KUALA LUMPUR (Oct 21): US rate cuts will spur fund inflow into Malaysia and support trading momentum, UOB Kay Hian said in advising investors to start buying Bursa Malaysia Bhd (KL:BURSA).

Recent developments appear to mark the end of US’ tightening cycle started in 2022, reinforcing an increasingly risk-on environment, the research house said. Such policy turning points have in the past led to stronger foreign inflows into emerging market currencies and risk assets, it noted.

Bursa Malaysia is in “a sweet spot to benefit from potential foreign inflows” with its laggard performance and stable earnings outlook, boosting the average daily trading volume, UOB Kay Hian said.

UOB Kay Hian upgraded Bursa Malaysia to “buy”, joining a minority of analysts bullish on the stock, and raised its target price to RM9.80, the highest among analysts covering the exchange operator. The consensus however is overwhelmingly cautious with 11 out of 18 analysts having “hold” call.

Share prices of Bursa Malaysia have climbed under 3% in the past one month but are still down nearly 8% year to date. The average daily volume on Bursa Malaysia has risen to RM2.9 billion so far this month, from RM2.3 billion in the April-June quarter.

Last week, US Federal Reserve chairman Jerome Powell said in a speech that the central bank’s balance sheet drawdown may be nearing its end. Powell has also kept the door open for more interest rate cuts following September’s reduction.

“We expect equity market sentiment to strengthen into 2026, supported by a more accommodative monetary policy, easing inflationary pressures, and a resilient macroeconomic outlook,” UOB Kay Hian said.

The house noted that it has also raised its earnings forecast to account for the stronger-than-expected trading activity and increased the forward earnings multiple to about 26 times against the average of 23 times, “to capture the early stages of a potential upcycle”.