Malaysian stocks reached a milestone as it hit RM2t in market capitalisation for the first time ever yesterday (May 7).
MIDF Research’s Equity Brief today (May 8), said this was due to broad gains in blue chip stocks and a slew of new listings.
Bursa Malaysia Berhad’s FBM KLCI rallied for its fourth straight day to close above the 1,600 level for the first time in two years. The FBM KLCI closed at 1,605.68, its highest close since 8 April 2022.
MIDF said this was not surprising giving current market momentum. Average daily volume on a year-to-date basis (as of 7 May 2024) came in at 4.19b shares, an increase of +28.7%yoy, surpassing 2022 and 2023 levels.
Highest trading volume since 2021. Providing some context, the average daily volume in 2020 and 2021 were 7.32b and 5.71b shares respectively. However, MIDF said they must recall that this was achieved during a period of global lockdown due to COVID-19 pandemic which saw higher retail investors participation.
“Since the reopening of the economy, the retail investors’ participation has normalised. Therefore, we are positive of the latest milestone reached for the market and we expect that this will translate to better earnings for Bursa Malaysia.”
Higher trading interest in 1QFY24. Recall that Bursa Malaysia saw its 1QFY24 Average Daily Value (“ADV”) (OMT) rose +36.9%yoy to RM2.93b as all segments saw higher trading interest, especially foreign institutions.
ADV (OMT) for domestic institutions, retail and foreign institutions grew +22.8%yoy to RM1.25b, +7.4%yoy to RM656m and +99.0%yoy to RM1.02b respectively.
MIDF is unsurprised by this given the buoyant sentiment for global risk assets on the expectations of US rate cuts in 2024.
FBM KLCI the best performer thus far. In terms of index performance, the FBM KLCI saw YTD (as of 7 May 2024) gains of +10.4%, which makes it the best performing index in ASEAN thus far.
Comparing to its other peers, only Japan’s NIKKEI have outperformed with a gain of +16.0%. MIDF believes that one of the factors is the support provided by local investors and the return of foreign funds in May.
Although MIDF observed foreign funds net outflow of RM4.25b in period between Mar-24 and Apr-24, it has seen a net inflow of RM1.0b in May-24 thus far.
MIDF is sanguine on the prospect of foreign funds returning to Malaysian market on the back of US rate cuts and subsequent expectation of USD to weaken in light of this.
Transitioning into a Multi Asset exchange. 1QFY24 saw Bursa launching Bursa Malaysia Dalian Commodity Exchange Soybean Oil Futures, Bursa Gold Dinar and SME X Platform amongst others.
For its core business, it saw 9 IPOs and listing of the first Business Trust.
MIDF is positive on these initiatives. However, they expect the impact to be more of medium to long term. As for the short-term, it will continue to be influenced by market vagaries.
Outlook. MIDF expects good prospect for trading activities in Bursa Malaysia this year from a corporate earnings and valuation point-of-view and expect robust economic growth and hence corporate earnings.
MIDF also expects that the expectations of US rate cuts will lead to positive sentiment, especially amongst foreign investors, and this will drive better market valuations.
Maintain BUY on Bursa Malaysia Berhad. MIDF has seen better trading activities thus far this year on the back of the expectation of US Fed rate cuts. Bursa Malaysia is well-positioned to continue developing the marketplace and make further progress of its strategic plans.
MIDF sees these initiatives may result in Bursa enhancing its trading platform and hence its attractiveness. In the short-term though, the ongoing global and local developments will continue to influence the volatility and performance of the securities and derivatives markets. MIDF maintains their BUY call on the stock with an unchanged TP of RM8.20.
