KUALA LUMPUR (Sept 14): Bursa Malaysia Bhd (KL:BURSA) is expected to report a softer third-quarter as securities trading activity declines amid a renewed Iran war, said an analyst.
The average daily trading value for on-market equity transactions has moderated since the start of July dragged by concerns over inflation and possibility of higher US interest rates, BIMB Securities said in a report. The exchange operator is expected to release its quarterly results on Oct 28.
However, stronger derivatives trading income driven by increased activity in palm oil futures contracts is expected to provide some cushion, the research house said.
BIMB Securities is forecasting quarterly net profit of RM68.5 million, a 4.5% decline quarter-on-quarter. That brings nine-month results to RM213.1 million, reflecting a 12.6% year-on-year growth.
Shares of Bursa Malaysia have gained less than 3% year-to-date amid broader macroeconomic concerns and geopolitical uncertainties that weighed on risk-taking. Trading velocity — which measures the level of trading activity relative to the market’s overall capitalisation — has also dipped.
Still, analysts tracked by Bloomberg are split on further upside with 10 ‘buy’ calls, including BIMB Securities, eight ‘hold’ and one ‘sell’ call. The average target price is RM9.19, implying potential upside of less than 10% from the last price of RM8.37.
The caution among traders has overshadowed bright prospects of initial public offerings (IPOs). Bursa Malaysia has hosted more than 40 listings so far this year and the exchange has raised the targeted IPO market capitalisation to RM34 billion for this year from RM28 billion previously.
“This healthy flow of new listings is expected to sustain investor interest and provide additional support for trading activity in the securities market,” BIMB Securities said.
The ongoing market volatility, meanwhile, is positive on trading of derivatives, the house said, noting that the stock continues to offer an attractive total return of 14.7%, inclusive of dividend yields.
“We see the recent pullback in its share price as an opportunity for investors to accumulate,” BIMB Securities added.