MCO 2.0 to spur securities, derivatives trading: AmInvest

KUALA LUMPUR – AmInvestment Bank Bhd (AmInvest) expects the continued volatility due to the rise in the daily tally of Covid-19 cases and uncertainties during the current movement control order (MCO 2.0) to spur securities and derivatives trading on Bursa Malaysia.

In a note today, it said the continued volatility bodes well for active trading in the securities and derivatives markets. 

“We see value reemerging on Bursa Malaysia Bhd’s stocks, providing opportunities to accumulate after the retreat in the share price from a high of RM10.98,” it said.

The investment bank expects markets to remain volatile in the near term, pending clearer signs of a firmer economic recovery. 

On Bursa’s financial results, AmInvest projects that the local stock exchange operator would see lower earnings for the fourth quarter of 2020 (Q4 2020), easing 1.9% quarter-on-quarter to RM119.6 million from RM121.9 million in Q3 2020.

It said that the projection is based on the lower daily average trading value (DATV) for securities market, despite the improvement in the derivatives trading revenue. 

“This will bring Bursa’s full financial year ended December 31, 2020’s (FY20) earnings to RM391.6 million (which is an increase of 110.1% year-on-year), thus above our earlier estimate of RM373.5 million, supported by higher securities and derivatives trading revenue,” it said.

AmInvest said Bursa is scheduled to release its Q4 2020 results on February 2, 2021.

Overall, AmInvest has upgraded its recommendation on Bursa to a “buy” from “hold” call,  with a higher fair value of RM9.65 from RM9.50 per share previously.

The investment bank also raised the company’s FY20/21 earnings forecast by 4.9%/7.3%, factoring in higher DATV of RM4.2 billion/RM3.2 billion (previously: RM3.8 billion/RM2.7 billion) for the securities market. 

“Also, we have raised our assumptions for the average daily contracts (ADC) traded for derivatives in FY20/21 to 73,000/75,920. 

“We are now pegging the stock to FY21 price-to-earnings ratio (PER) of 26 times from 28 times previously, in line with the average of listed stock exchanges regionally,” it said.

At 10.58am, Bursa’s share lost 5 sen to RM8.73, with 210,200 shares traded. – Bernama, January 21, 2021