PETALING JAYA: Bursa Malaysia Bhd is expected to see weaker sequential earnings for the final quarter of last year, as lower trading volume in the equity market weighs on its bottom line.

       Daily average trading value (DATV) of equities (on-market transactions) for the three months to December 2021 (Q4’21) fell to RM2.5bil from RM2.9bil in Q3’21 and RM3.8bil in Q2’21.

       In its report, AmInvestment Bank Research (AmInvest) said Bursa Malaysia would likely see a decline of up to 11.4% quarter-on-quarter in earnings to RM71mil for Q4’21 due to lower DATV for securities market.

       This is expected to lead to a full 2021 net profit of RM361mil, down 4.5% year-on-year (y-o-y), for the stock exchange, AmInvest said.

       Bursa Malaysia is scheduled to release its Q4’21 results on Jan 28.

       AmInvest cut its fair value for Bursa Malaysia to RM6.50 per share, compared with RM7.90 per share previously, on account of lower earnings estimation.

       It maintained a “hold” recommendation on Bursa Malaysia.

       AmInvest also lowered its core earnings projections for Bursa Malaysia by 10.4% to RM238mil for 2022, and by 9.8% to RM246mil for 2023. This was after factoring in lower DATV of RM2.4bil and RM2.5bil (previously RM2.8bil and RM2.6bil) for the securities market for both years, respectively.

       The brokerage pegged its valuation for Bursa Malaysia at a price-earnings ratio of 22 times.

       It noted that DATV for the securities last year came in at RM3.5bil, slightly lower than its estimate of RM3.7bil. This represented a decline of 15.8% y-o-y in DATV from RM4.2bil in 2020, and it was contributed by weaker trading activities in Q4’21, AmInvest said.

       “We continue to expect lower DATV assumptions for the securities market in 2022 and 2023 compared to previous two financial years,” it added.

       AmInvest said this would be underpinned by the gradual tapering of asset purchases by developed markets, which will reduce excess liquidity in the market; the end of broad loan repayment assistance programme (moratorium) after 2021; temporary suspension of regulated short selling, intraday short selling and proprietary day traders short selling, which have all been lifted; and the uptrend in interest rates.

       In Q4’21, trades by institutions accounted for 41.7% of the total value of securities traded versus 33.5% in Q3’21.

       This was contributed by a higher percentage in the value of securities traded by foreign institutions.

       Trades from retail investors and investment account traders were lower at 30.8% and 13.1%, respectively, in Q4’21 compared to 35.1% and 15.1%, respectively, in Q3’21. For nominees, the percentage of the value of securities traded was also lower at 14.5% in Q4’21 versus 16.3% in Q3’21.

       Foreign fund inflow into the securities market was higher at RM600mil cumulatively in Q4’21 versus RM452mil in Q3’21.

       For derivatives trading, the average total contracts traded remained stable at circa 70,000 in Q4’21 versus 71,000 in Q3’21.

       For the entire 2021, the total average daily contracts (ADC) traded for derivatives was 75,487 (+2.7% y-o-y), close to AmInvest’s estimate of 77,000 contracts.

       Last year, ADC for crude palm oil futures, rose 8.6% y-o-y to 63,968 contracts while ADC for the FTSE Bursa Malaysia KLCI Futures, or FKLI, fell 21.5% y-o-y to 11,067.