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Analyst turns bullish on Bursa Malaysia, expects pre-pandemic record average trading value in FY24

Publish date: Thu, 23 May 2024, 10:00 AM

KUALA LUMPUR: Bursa Malaysia Bhd is expected to record average daily trading value (ADV) of RM2.73 billion in financial year 2024 (FY24), surpassing its pre-pandemic peak of RM2.39 billion in FY18.

Hong Leong Investment Bank Bhd (HLIB research) stated in a note that after two prior lull years of ADV, the exchange has staged a strong resurgence up till May 20 to RM3.02 billion. "Contrary to our initial belief that ADV would sequentially soften in the second and third quarter, given the postponement of the US Federal Reserve's (Fed) rate pivot, investors seem to have shrugged off this delay," it said in a note.

The firm upgraded its call on Bursa Malaysia to "Buy" from "Hold" previously with a higher target price of RM9.15.

It raised its earnings forecast for Bursa Malaysia in FY24, FY25 and FY26 by 10 per cent, eight per cent and eight per cent respectively.

Among the factors that could contribute to Bursa's performance is the successful privatisation of Malaysia Airports Holdings Bhd, that would generate RM12.3 billion worth of funds, that could potentially be redeployed back into the market - supporting trading activity in the fourth quarter of 2024 (Q4 2024).

It added domestic macro fundamentals are showing upbeat numbers, which should lend confidence for investors to stay invested in the local bourse.

By investor type, foreigners showed the largest ADV jump to RM1.03 billion year-to-date (YTD).

Despite being so, foreign shareholding in Malaysian equities remained near the bottom of the barrel at 19.6 per cent in April.

"Our regression model indicates that foreigners' underweight position in Malaysia (as of Apr-24) is one of the largest in the past decade. "This suggests ample room for foreign liquidity to pour into the local stock market. Hypothetically, a move by foreigners from underweight to market weight could potentially lead to RM20.4 billion foreign inflows, by our estimates," HLIB research said.

It also expects the Fed's rate pivot to happen in December.

"From this timeline, we envision a further boost to risk appetite for emerging market equities in Q4 2024. Resulting ringgit recovery from the Fed's eventual pivot should also support positive sentiment on the market," it said.

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