Bursa’s ADV continues to slug
Softer activities likely to persist. We initially anticipated FY22 and FY23 ADV to clock in at RM2.70 billion and RM2.60 billion but now opine that levels of RM2 billion and RM2.1 billion are more likely.
Kenanga Research
KUCHING: Bursa Malaysia’s average daily value traded (ADV) in the second quarter of financial year 2022 (2QFY22) looks to close at circa RM2.13 billion – a far cry from analysts’ initial 2QFY22 target of RM2.5 billion where the softer trading sentiment is believed to be largely due to global conflict-stemmed concerns.
During the 2QFY22 period, researchers with Kenanga Investment Bank Bhd (Kenanga Research) noted that supply chains issues abound coupled with volatile commodity prices keeping inflationary pressures constant.
“Softer activities likely to persist. We initially anticipated FY22 and FY23 ADV to clock in at RM2.70 billion and RM2.60 billion but now opine that levels of RM2 billion and RM2.1 billion are more likely,” it said yesterday.
“Global macros remain unfavourable with recent US inflation rising to 9.1 per cent as of June 2022, culminated by the abovementioned reasons.”
Locally, while it hoped for sequentially better GDP numbers from the reopened economy, the research house saw that recessionary concerns may dissuade foreign participation.
Additionally, retail investors may progressively retreat towards safer long-term investment and savings products as Bank Negara is expected to continue raising OPR – another two 25 basis points hikes are expected.
“This only swells the riskreward for margin trading unfavourably,” Kenanga Research said. “We continue to expect weakness in trading activities as the two previous years’ heyday of heavy trading of healthcare-related stocks are not likely to reoccur.
“That said, we believe that much needed positive catalysts could range from 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 mediumterm endeavour; earlier-thanexpected General Elections; and sustained growth in commodity prices to support trading in the beneficiaries.”
Post update, Kenanga Research cut its FY22 and FY23 earnings by 13 and 10 per cent from the abovementioned ADV reductions to RM2 billion and RM2.10 billion. This translates to 2HFY22 ADV to only average at RM1.7 billion which it did not believe to be as farfetched.
“That said, we estimate 2QFY22 to report net earnings of RM60 million to RM65 million.
“Trading income makes up at least two thirds of Bursa’s total income and will likely remain as the lion’s share as its other income from listing and depository services also hinges on the overall sentiment of the equities market.
“The group has been persistently vying for methods to improve efficiency which is testament to its leading ROEs. Additionally, though the group has been benefitting from equities rally in recent years, management has been proactively working towards developing other revenue streams to cement its long-term sustainability.”
Bursa’s upcoming earnings release is slated to be on July 28, 2022.