China reopening projected to support Bursa’s average daily trading value

HLIB Research noted that while the ADV saw a recovery at RM1.94bil in the fourth quarter of 2022, the figure translates to a 23.6% drop year-on-year.

PETALING JAYA: The average daily trading value (ADV) of securities on Bursa Malaysia is expected to be supported by China’s reopening and the likelihood of the Federal Reserve reversing its monetary policy direction, says Hong Leong Investment Bank (HLIB) Research.

HLIB Research noted that while the ADV saw a recovery at RM1.94bil in the fourth quarter of 2022 (4Q22), the figure translates to a 23.6% drop year-on-year (y-o-y). Derivatives contracts average daily volume surged 12% y-o-y to 78,900 contracts per day.

“Assuming other revenue comes in within its recent quarterly run rate of RM54mil to RM57mil, alongside sequentially unchanged operating expenditure, we estimate that earnings in 4Q22 could chalk in at RM53.4mil, a 17.7% surge y-o-y,” HLIB Research stated in a recent report on the exchange operator.

The research house added this would fall within both its and consensus full-year forecast of 101% and 102% respectively for Bursa’s financial year 2022 (FY22).

The local bourse is expected to release its 4Q22 results on Jan 31, 2023.

“The FY22 ADV of RM2.07bil came in close to our projected RM2.06bil, a 0.6% increase in variance,” said HLIB Research.

The research outfit projected the dissolution of Parliament in October last year would lead to a near-term surge in ADV following the 15th General Election and lead Bursa’s share price higher, making it ripe for trading opportunities.

“This has played out as hypothesised with November 2022’s ADV increasing by 24.5% month-on month before easing 8.6% in December 2022.

“Share price performance has also done its part, increasing by as much as 16.7%, hitting our target price of RM7 on Nov 24, 2022, since our upgrade report,” said HLIB Research.

The research house has lowered its ADV assumption for Bursa by 4% to 5% at RM2.2bil and RM2.3bil, respectively.

HLIB Research has changed its call on the company from a “buy” to a “hold” with a target price of RM6.43, citing no further ADV boosters in sight other than the post-election trade.