PETALING JAYA: With the average daily trading value (ADV) on the local stock exchange remaining elevated into the new year, analysts have maintained a rather bullish stance on Bursa Malaysia Bhd.
Maybank IB Research noted that January’s equity ADV has stayed robust at RM5.05bil month-to-date (m-t-d), hitting above RM5bil in eight out of the 16 trading days this month, which is a strong start to the year.
It opined that an ADV of above RM4bil is the new base amid a low interest rate environment persisting until end-2021, at least.
“Trading momentum has been unfazed by the upliftment in regulated short selling (RSS) suspension on Jan 1,2021, which was in place since March 23,2020, with retail participation remaining high at 39% m-t-d (2020: 37%; 2019: 24%).
“The last three months of 2020 also saw high ADVs of RM4.37bil (Oct), RM5.25bil (Nov) and RM5.32bil (Dec), bringing 2020 ADV to RM4.31bil (+100% year-on-year), above our RM4bil forecast, ” it said in a report yesterday.
Accordingly, the research firm raised its 2021 and 2022 ADV forecasts to RM4bil and RM4.2bil from RM3.5bil and RM3.6bil, respectively.
Given the positive outlook on equities trading, Maybank has upgraded Bursa Malaysia to a “buy” from “hold” previously with a new target price of RM10.05 compared to RM9.10 earlier.
Maybank has also raised its FY20 net profit for the bourse by 5% to take into account the higher equity ADV of RM4.31bil for last year. Net profit forecasts for FY21 and FY22 have also been raised by 10% and 11%, respectively.
Bursa Malaysia will be releasing its 4Q20 results on Feb 2.
The research house added that Bursa Malaysia’s estimated 4.5% dividend yield offering for FY21 is attractive, representing one of the highest dividend yields amongst its peers.
“We think it has the capacity to pay a special (dividend) over the next 12 months, ” it said.
Other upside factors for the counter include higher-than-expected equity trading activities and increased volatility in commodity prices and FBM KLCI, further driving derivative market activities.
But Maybank cautioned that there is also a possibility of liquidity drying up, which would lead to much smaller equity ADV. Other risks include retail investors taking a more cautious stand in equities, derivative market activities falling short as well as further retracement of foreign funds in Malaysia equities - market foreign shareholding was 20.7% at end-Dec 2020.
Other catalysts for Bursa Malaysia include its upcoming three-year Business Plan (2021-23), which will be taking over from its four-year Plan (2017-20) that just ended.
Maybank also noted that Bursa Malaysia’s ESG (environment, social and governance) risks are low and remain a positive factor for its valuation over the longer term as more investors include ESG considerations in their investment decisions.
As an exchange operator and regulator, Bursa Malaysia encourages sustainable development by promoting responsible growth while facilitating fund raising, value and wealth creation. Its globally benchmarked FTSE4Good Bursa Malaysia Index was introduced in 2014, and listing criterias have been amended requiring public listed companies to report on their sustainability practices.