-  We maintain our BUY recommendation on Bursa Malaysia Bhd (Bursa), with an unchanged fair value of RM9.50/share. This is based on a target PE of 26x over its FY14F earnings.

- Bursa had yesterday announced the new product and service offerings it will bring to the domestic capital market in a bid to strengthen its position as ASEAN’s multinational marketplace.

- In line with its key deliveries for the year, the group will be launching the region’s first Environmental, Social and Governance (ESG) Index. The “FTSE 4Good Index”, which is targeted to be implemented by year-end, will be formed from a basket of 200 companies, covering 14 sectors (eg. corruption and labour supply).

- By creating the index, Bursa is hoping to tap into the USD3.4tril (RM10.9tril) market for socially responsible investing and at the same time promote openness and transparency. The group will be working with FTSE (its current partner ) to implement the index, which will be part of both the FTSE Bursa Malaysia and FTSE4Good index categories.

- Besides the ESG index, Bursa had also announced the launch of a new product for its derivatives market, namely the USD-denominated futures contracts for refined, bleached and deodorised palm olein (FPOL). This comes on the back of the launch of the gold futures contract (FGLD) in 4Q13 and will raise the number of products on Bursa’s derivatives platform to 12.

- The FPOL is aimed at strengthening its position as the global leader in palm oil derivatives. At present, its crude palm oil futures contract (FCPO) is the global price benchmark for crude oil palm. The latter accounts for ~80% of the average daily contracts (ADC) traded (1Q14: 50,046).

- We are keeping our numbers for now as we do not see a significant impact on trading volumes for both the securities and derivatives markets following the announcement of these two initiatives. That said, we believe that the creation of an ESG Index may provide a base for the creation of more products in the future.

- Bursa’s other key initiative for the year included raising the domestic retail participation (1Q14: 26%). For that, the group had launched “BURSAMKTPLC” (Bursa Marketplace) in April to attract the new investors, mainly those between 25 and 35 years old. The online community port.

Source: AmeSecurities