BURSA Malaysia Bhd reported strong results for the first half of its 2020 financial year ended June 30, but analysts say net outflow of foreign funds could likely persist.
“Despite turning in a solid 1H performance due to heightened volatility in the market, we continue to observe that the macro fundamentals remain poor. As expected, the net outflow of foreign funds continued in 1H and could likely persist,” said TA Securities analyst Li Hsia Wong.
Li also remains cautious on Bursa’s outlook, noting that the recovery of the domestic economy is subject to various downside risks. These include softer corporate earnings, weak labour market conditions, fragile consumer confidence, and domestic political uncertainties.
“On the external front, global economies remain weak especially with concerns over the resurgence in Covid-19 cases and rising geopolitical risks from an ongoing trade war,” added Li.
Bursa had reported a year-on-year (yoy) increase of 62% in net profit for its 1H2020 to RM151 mil, with annualised return on equity jumping 39% compared to 21% yoy. The increase was attributed to a higher operating revenue, from an increased number of securities and derivatives trading.
AmInvestment Bank analyst Kelvin Ong noted that the daily average trading value (DATV), which hit RM3.1 bil in 1H2020, looks robust moving into the stock exchange’s third quarter, but expects the DATV to taper in the fourth quarter, pointing to the likely ending of the loan moratorium in September.
“Borrowers will then be required to start servicing their loan repayments from Oct 1. This is expected to reduce the level of cash to be diversified to stocks in the search for higher yields as seen recently,” said Ong.
The AmInvest analyst also noted that the suspension of short selling and the flexibility on share margin accounts are seen only as temporary measures to encourage retail participation in the securities market.
Retail participation had leapt 33% in 1H2020, compared to 25% in the corresponding period in 2019, with the number of new Central Depository System (CDS) accounts almost doubling yoy to 167,321.
TA Securities maintained a sell call on Bursa, but raised its target price to RM7.80. AmInvest downgraded Bursa to a sell call from hold, and increased its fair value to RM9.30 from a previous RM8.20.
At the market’s noon close, Bursa’s shares were at RM9.56, down 48 sen, with 5.8 million shares traded. – July 29, 2020
