THAT investor participation is expected to have bottomed in 3Q CY2022 on depressed sentiment but should pick up meaningfully in 1H CY2023 on general election (GE)-angled trading that has prompted Kenanga Research to raise its target price of Bursa Malaysia Bhd to RM6.50 (from RM6.30 previously).
In the research house’s view, positive catalysts could range from: (i) favourable resolution of the Russia-Ukraine conflict albeit the sentimental boost may not be long lasting as the mending of economic damage would be a medium-term endeavour; (ii) earlier-than-expected 15th General Election (GE15) (ie pre-2023); and (iii) sustained growth in commodity prices to support stock trading of the beneficiaries.
“Looking towards CY2023, we forecast ADV (average daily volume) to come in at circa RM2.23 bil (consisting of 1H CY2023 at RM2.30 bil and 2H CY2023 at RM2.15 bil), mainly spurred by GE15 which is more likely to be held in 1Q CY2023,” projected analyst Clement Chua who reiterated a “market perform” rating on the stock exchange operator.
“Historically speaking, general elections have been a trading catalyst as investors will seek to position in line with their expectations of the election’s results and recalibrate their portfolio if expectations are not met.”
However, Kenanga Research cautioned that foreign investor outflow could also be triggered if policy uncertainties ripple from the election outcome. That said, there could be a gradual cooling off in the 2H CY2023 period unless strong macros develop.
Moving forward, the research house expects Bursa Malaysia’s 3Q FY2022 to report net earnings of RM50 mil-RM55 mil (-35% year-on-year; -10% quarter-on-quarter).
“Trading income makes up at least two thirds of Bursa’s total income and will likely remain the lion’s share as its other income from listing and depository services also hinges on the overall sentiment of the equities market,” noted the research house.
“The group has been persistently vying for methods to improve efficiency which is a testament to its leading ROEs. Though it has been benefitting from equities rally in recent years, the management has been proactively working towards developing other revenue streams to cement its long-term sustainability.”
Bursa Malaysia’s upcoming earnings release is slated to be on Oct 31.
At 3.20pm, Bursa Malaysia was up 5 sen or 0.81% to RM6.26 with 351,300 shares traded which valued the company at RM5.07 bil. – Oct 5, 2022
Main photo credit: Bernama