PETALING JAYA: Bursa Malaysia could see trading activity strengthen in the coming months, supported by an expansion of the benchmark index, the next general election and potential foreign fund reallocations within Asean.
The stock exchange operator is expected to benefit from higher trading volumes despite a sequential slowdown in securities activity in the third quarter of financial year 2026 (3Q26), with its upcoming results likely to remain broadly in line with expectations.
Hong Leong Investment Bank (HLIB) Research expects Bursa’s 3Q26 revenue to remain largely unchanged from the preceding quarter, while core earnings are projected to ease slightly by 1.9% quarter-on-quarter (q-o-q) to RM70.4mil.
This is despite securities average daily volume (ADV) falling 10.6% q-o-q to RM2.95bil, as stronger derivatives average daily contracts (ADC) of 125,500, up 18.8% q-o-q, and three additional trading days help cushion the impact.
On a year-on-year (y-o-y) basis, securities ADV is expected to grow 14%, while derivatives ADC is projected to rise 38.3%.
Overall, revenue is forecast to increase 17.7% y-o-y, assuming other revenue maintains its quarterly run rate of about RM80mil.
“If accurate, this would bring nine-month core earnings to RM215mil, up 12.6% y-o-y,” HLIB Research said, noting that would account for 75% of its full-year forecast for the company.
Bursa is scheduled to announce its 3Q26 results on Oct 28.
Looking ahead, HLIB Research sees several catalysts that could support trading activity, beginning with the FBM KLCI’s planned expansion from 30 to 50 constituents.
The upcoming December 2026 review is expected to involve at least 40 constituent changes across the FBM KLCI and FTSE Bursa Malaysia 70 Index (FBM70), including 20 companies entering the FBM KLCI and 20 leaving the FBM70.
This compares with an average of 11 constituent changes across the FBM KLCI, FBM70 and FTSE Bursa Malaysia Hijrah Shariah Index during past semi-annual reviews between 2020 and the first half of financial year 2026.
HLIB Research noted that previous reviews generated an average 31.3% increase in value traded on the day before the changes took effect, compared with baseline ADV.
The larger number of changes expected in December could, therefore, have a more pronounced impact on trading activity.
The 16th general election (GE16), which HLIB Research now expects to take place next year rather than in 4Q26, could provide another boost.
“Taking these results into consideration, we view Bursa as an apolitical election play – benefitting from an ADV boost without being encumbered by ‘political linkages’,” it said, noting that ADV rose between 36.5% and 70.3% a month after the previous three general elections.
Foreign fund flows could also offer support if index provider MSCI proceeds with its proposal to reclassify Indonesia from emerging market to standalone market status, potentially redirecting regional investment towards Malaysia and other Asean markets.
HLIB Research maintains its “buy” rating on Bursa but has lowered its target price to RM9.38 from RM9.85, applying a lower price-to-earnings multiple of 25 times instead of 27 times to end-financial year 2027 earnings.
Meanwhile, one analyst told StarBiz that the outlook for Bursa remained positive, as higher trading activity could support earnings growth, particularly if market sentiment remains firm and investor participation broadens in the coming months.
“The planned index expansion and upcoming general election could provide a near-term boost to trading volumes, although sustained activity will depend on market confidence and foreign investor flows,” he stated.
