Investor participation seen to improve in 1H23

GE15 expected to be trading catalyst for Bursa

“The group has been persistently vying for methods to improve efficiency which is testament to its leading return on equities.” Kenanga Research

PETALING JAYA: Investor participation in the stock market may have bottomed out in the third quarter of 2022 (3Q22) amid the depressed sentiment.

Looking ahead, participation could pick up “meaningfully” in the first half of 2023 (1H23) due to the “general election angled trading”.

This is on the assumption that the 15th General Election (GE15) would be held in 1H23, according to Kenanga Research.

The research house said GE15 is expected to drive better trading activities on Bursa Malaysia, as general elections have historically been a trading catalyst for the bourse.

Kenanga Research projects the average daily value (ADV) for Bursa Malaysia in 1H23 to jump to Rm2.3bil.

“That said, softer global macros would still fog outlook until positive catalysts materialise in the medium term,” it said in a note yesterday.

The research house believes there could be a gradual cooling off in 2H23, unless there are strong macro developments.

The ADV for Bursa Malaysia in 2H23 is projected at Rm2.15bil.

The research house also cautioned that heavy foreign investor outflow could be triggered if policy uncertainties ripple from the election outcome.

It noted that the ADV for 3Q22 appears to be trailing at about Rm1.62bil.

As for 4Q22, the research house anticipates the ADV to come in close to Rm1.80bil.

Commenting on the ADV for 3Q22 that has softened from 2Q22’s Rm2.1bil, Kenanga Research said trading activities slowed further during the period from fears of a global recession stemming from the US Federal Reserve’s aggressive policy tightening.

“However, the later part of the period did pick up gradually with better corporate earnings performance boosted by recovering economic prospects,” it said.

Looking ahead, Kenanga Research has slightly tweaked the earnings forecast for the stock exchange operator, Bursa Malaysia Bhd, as it fine-tuned the year-to-date ADV readings and slightly raised the ADV estimate for 2023.

The earnings forecast for financial year 2022 (FY22) was raised by 1% and 3% for FY23.

As for 3Q22, Bursa Malaysia is forecast to report net earnings of Rm50mil to Rm55mil, down by 35% year-on-year and 10% quarter-on-quarter.

The results are slated to be announced on Oct 31.

“Trading income makes up at least twothirds of Bursa Malaysia’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,” it said.

Kenanga Research has maintained its “market perform” view on Bursa Malaysia, but raised the target price to RM6.50 from RM6.30.

“The group has been persistently vying for methods to improve efficiency which is testament to its leading return on equities.

“Additionally, though the group has been benefitting from the equities rally in recent years, the management has been proactively working towards developing other revenue streams to cement its long-term sustainability,” it said.