News  Last Friday, Bursa Malaysia (BURSA)announced that its 75% owned subsidiary, BursaMalaysia Derivatives Bhd (BMD) was grantedregistration as a Foreign Board of Trade (FBOT)by the US Commodity Futures TradingCommission (CFTC).

 With this recognition, it provides legal certainty toUS-based market participants with direct accessto BMD’s suite of products.

 Elsewhere, the Singapore Exchange DerivativesTrading Ltd was approved as a registered FBOTas well.

Comments

 Business as usual, the FBOT status onlysignifies compliance with the latest US laws andregulations.

 Recall, BURSA entered into a strategicpartnership with Chicago Mercantile Exchange(CME) Group back in 2009. This involved: (i)equity participation, (ii) licensing of Crude PalmOil Futures (FCPO) settlement price and (iii)provision of CME Globex trading platform.

 Since then, BURSA saw its derivatives tradingrevenue grew by a 4-year CAGR (2009-2013) of16% (this segment contributes ~15% to totalrevenue). In the same vein, the total averagedaily trading volume for futures contracts rose by15%.

 BURSA is poised to announce its 4Q14 financialresults this Thursday.

Outlook  In 2015, we expect lacklustre trading activities inthe securities and derivatives markets.

 We believe investors (especially within the retailspace) are: (i) likelier to stay on the sideline and(ii) become more vigilant with their trading habitsgiven the current choppy market environment.

 Foreigners have been net sellers of Malaysianstocks for the past 6 months and are unlikely toreturn anytime soon.Forecast

 No changes were made to our forecasts.

Rating Maintain MARKET PERFORM

Valuation  Our TP of RM8.30, based on 22.5x FY15 EPS isunchanged (-0.5SD below its 5-year averageP/E). This is also in line with the valuationmultiples of its regional peers.

Risks to Our Call Lower-than-expected trading volume in thesecurities and derivatives markets.

 Deferment of key IPOs in 2015.

 Higher-than-expected opex.

Source: Kenanga