FACTORS that will support Bursa Malaysia, including large initial public offerings that were previously deferred, will provide opportunities for investors to return to the market.
Malaysia’s leadership in the palm oil suite of capital market offerings is, among others, a potential strong catalyst for growth.
“We will step up efforts to engage investors to highlight the resilience, diversity and quality of our companies and other product offerings,” said Bursa Malaysia.
This is via its flagship events that include Invest Malaysia and the virtual palm oil conference.
Bursa Malaysia, which is expected to see lower trading volume on higher stamp duty rates and the Cukai Makmur, will develop other products and activities to make up for any potential loss in income.
Bursa Malaysia sees potential in exchange-traded funds (ETFs) where stamp duty is exempted until Dec 31, 2025.
The exchange also plans to focus on products that cater to syariah and socially responsible investors.
For its derivatives business, it aims to diversify into other commodities including soybean oil futures and introduce new financial/equity derivatives.
Building on its data analytics business, the exchange will introduce new products and services to enhance its data offerings/solutions.
The shift towards ethical or value-based investing globally augurs well for Bursa Malaysia’s prospects.
“The convergence of sustainability, responsible investing and syariah investing, is expected to deepen our competitive edge, and make our offerings highly relevant to investors around the world,’’ said Bursa Malaysia.
Being a country with diverse economic activities and positive growth prospects, there is always something unique that Malaysia’s capital markets can offer.
For instance, Bursa Malaysia leads in the Islamic capital market space with a strong potential to grow further; about 77% of its listed stocks are syariah-compliant, and almost 40% of its ETFs are syariah-compliant.
Ongoing efforts to digitalise its services, liberalise the regulatory framework, where relevant, and widen its products and services have also allowed Bursa Malaysia to capitalise on new opportunities and stimulate long term interest in Malaysia’s markets.
The exchange continues to work closely with regulators to ensure market efficiency and improve market accessibility and liquidity, to support participants during these challenging times.
The recently announced public listed companies (PLC) transformation programme will provide further guidance to PLCs in terms of their corporate performance.
Budget 2022 is the biggest announcement so far; the pump priming efforts by the government will be a key catalyst to draw in funds, given that construction projects can create high multiplier effects in the economy.The rollout of 5G will also help boost fund flows.
Overall, participation in the derivatives market has seen substantial growth since 2019.
On June 30, 2021, the total monthly volume for crude palm oil futures (FCPO) renewed to its all-time high at 1.7 million contracts (which is equivalent to 42.6 million tonnes of crude palm oil traded), surpassing the previous record of 1.66 million contracts traded in March 2020.
Since its launch on Oct 4, 2021, till Nov 9, 2021, the East Malaysian crude palm oil futures contract has made an encouraging start, with a total of 893 contracts traded.
With the implementation of phase two of the e-negotiated large trade (e-NLT), an off-market trading facility, on Sept 8, 2021, there has been an 18% increase in NLT average daily contracts as of Oct 20, 2021.
Bursa Malaysia’s flagship product, the FCPO contract, has recorded year-on-year growth of 7% compared to the total volume year-to-date October 2020.
The Bursa Suq al-Sila market, the global syariah-compliant commodity trading platform, continues to see a good rise in trading, with average daily trading value of RM36.2bil, as at Nov 10, 2021, representing a 10% year-to-date increase.
The sustainability index, the FTSE4Good Bursa Malaysia index, has played an essential role in recognising PLCs that have taken steps to improve their Environmental, Social, and Governance (ESG) practices and disclosures.
Since its launch in 2014, the number of constituents has increased from 24 to 76.
Besides the six ETFs that invest in companies listed on Bursa Malaysia, the other ETFs listed on the exchange saw a one-year return of between 92.08% to minus 33.42%.
These returns are for TradePlus NYSE FANG+ Daily (two times) Leveraged Tracker and TradePlus NYSE FANG+ Daily (one time) Inverse Tracker respectively.
“With 95% of the adult population fully vaccinated, the stock market outlook for 2022 should be encouraging,’’ said Bursa Malaysia.
Businesses are expected to rebound on pent-up demand following the pandemic, and the reopening of borders will encourage consumer spending.
Key sectors associated with the recovery theme that can potentially drive the stockmarket in 2022, include tourism, transportation, gaming, construction and building materials.
As more money flows into strong ESG companies, which correlate with well-managed and high performing companies, ESG-related counters could also be a potential theme.
Bursa Malaysia’s market price earnings (PE) ratio of 15.7 times is one of the lowest in the region, compared to its neighbouring peers which have PEs ranging from 18.0 to 19.7 times.
Malaysia is also blessed with commodities such as crude palm oil and petroleum, which are likely to benefit from the commodity price rally, which has coincided with the recent foreign inflows.
While seeing bright prospects, Bursa Malaysia is proactively seeking other opportunities and activities to boost its income streams.
Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.