Bursa Malaysia’s collaboration with Hong Kong Exchanges and Clearing (HKEX) is a significant step towards deeper regional capital market integration and could strengthen the local exchange’s long-term growth prospects, according to CIMB Securities Research.
The positive assessment follows the signing of a memorandum of understanding (MoU) on July 23 between the Securities Commission Malaysia (SC) and Hong Kong’s Securities and Futures Commission (SFC), aimed at enhancing cross-border capital market connectivity.
The agreement extends beyond facilitating the mutual recognition and cross-listing of exchange-traded funds (ETFs) and real estate investment trusts (REITs), laying the foundation for a simplified framework covering dual initial public offerings (IPOs) and secondary listings.
A key outcome of the agreement is Bursa Malaysia’s inclusion in HKEX’s Recognised Stock Exchanges (RSE) list, allowing eligible Malaysian-listed companies to pursue secondary listings in Hong Kong through a streamlined approval process.
Bursa Malaysia becomes the 21st exchange globally, spanning 19 countries, and the fourth in Southeast Asia to receive the recognition.
Broader opportunities for Malaysian companies
CIMB believes the new framework could significantly improve Bursa Malaysia’s attractiveness as a listing destination by giving companies access to both Malaysian and Hong Kong capital markets.
The research house said the initiative could expand Bursa’s pipeline of IPOs, attract more ASEAN companies seeking regional fundraising opportunities and increase participation from international investors.
The framework is also expected to encourage the development of more cross-listed ETFs and REITs, broadening Malaysia’s investment product ecosystem while improving market liquidity and depth.
For larger Malaysian corporates, the arrangement provides a clearer pathway to tap Hong Kong’s deeper capital pool and raise their international profile.
CIMB said the agreement lays the regulatory foundation needed to increase cross-border investment flows and deepen regional capital market participation.
Potential structural re-rating
Looking further ahead, the research house believes the initiative has the potential to transform Bursa Malaysia from a predominantly domestic exchange into a more integrated regional marketplace.
Successful implementation could support higher trading volumes, stronger market liquidity, a broader range of investment products, increased foreign investor participation and stronger revenue from listings and market data services.
Over time, CIMB said these developments could improve Bursa’s earnings visibility, strengthen structural revenue growth and reduce its dependence on domestic market activity, potentially supporting a higher valuation multiple.
Hold maintained despite lower target price
Despite the favourable long-term outlook, CIMB maintained its “Hold” recommendation on Bursa Malaysia, while lowering its target price to RM8.65 from RM9.00.
The revision follows cuts to its earnings forecasts for FY2026 to FY2028 by between 3.8% and 6.3%, reflecting lower expected clearing fee income due to a larger proportion of institutional trading as well as higher operating expenses.
The research house said Bursa currently trades at about 24.7 times forward earnings, below Singapore Exchange’s 32.7 times and Hong Kong Exchanges’ 26.4 times, but above the Australian Securities Exchange’s 20.4 times.
CIMB believes Bursa’s current valuation already reflects expectations of improving market activity but leaves limited room for further upside in the near term.
Second-quarter earnings expected to remain solid
Bursa Malaysia is scheduled to announce its second-quarter 2026 financial results on July 30.
CIMB forecasts net profit of RM76.7 million for the quarter, supported by strong trading activity across both the equity and derivatives markets.
Average daily trading value is estimated to have risen 47% year-on-year to RM3.5 billion, driven by heightened portfolio repositioning as investors navigated uncertainty surrounding global trade policies, US interest rate expectations, currency movements and domestic political developments.
The derivatives segment also remained resilient, with total contracts traded rising 15% year-on-year to 6.33 million, led by stronger activity in crude palm oil futures (FCPO), which accounted for about 84% of total contracts traded.
However, CIMB expects trading activity to moderate in the second half of 2026, forecasting average daily equity trading value of RM2.65 billion, which could limit earnings growth over the near term.
Nevertheless, the research house expects Bursa’s FY2026 earnings to grow 11.8% year-on-year, before normalising to growth of 1.0% in FY2027 and 2.5% in FY2028.
While near-term earnings may soften as trading activity normalises, CIMB believes the enhanced connectivity with Hong Kong represents a meaningful structural catalyst that strengthens Bursa Malaysia’s long-term competitive position within the regional capital markets landscape.
