MaSE Q3 profit surges year-on-year, but may be flat sequentially

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KUALA LUMPUR, Malaysia – Bursa Malaysia’s overall profit growth for the third quarter of 2023 (Q3 2023) is set to be strong year-on-year (y-o-y), driven by improved securities market performance. However, quarterly profit growth is likely to be flat as strong securities trading revenues were offset by weak derivatives revenues and higher expenses.

In a recent report, RHB Research said Bursa Malaysia’s securities average daily value (SADV) for the first quarter of 2023 stood at RM320 million, up 24% sequentially and 17% year-on-year. This was due to renewed investor interest in domestic equities, particularly in the construction and real estate sectors.

However, Bursa Malaysia’s Derivatives Average Daily Contracts (DADC) slipped 3% to 973 contracts in the third quarter compared to the same period last year due to a decline in trading volume in palm oil futures. This trend was partially mitigated by an increase in trading volume in FTSE Lombardy Index futures.

MaSE Q3 profit surges year-on-year, but may be flat sequentially

RHB Research noted that derivatives account for a relatively small percentage (less than 20%) of Bursa Malaysia’s total operating revenue, so the drop in trading volume is not expected to have a significant impact on earnings.

In terms of initial public offerings (IPOs), three new IPOs were added in the 2023 quarter, bringing the annual total to 25. Bursa Malaysia claims that it has a healthy IPO pipeline to achieve its 2023 target of 25 IPOs, although some of these may extend into 2024.

The Bursa Malaysia Carbon Exchange (BCX) platform, which began operations on August 25, 2023, trades and facilitates over-the-counter (OTC) trading of carbon credits. However, the total number of carbon credits reported for the first two trading days was only 16,500, which is not expected to contribute significantly to revenue and earnings in the short term.

Overall, RHB Research believes that Bursa Malaysia should see strong year-on-year and sequential growth in total operating income in the 2023 quarter, offset by an increase in sequential expenses. As a result, the research firm concludes that overall profits are likely to be flat YoY, but with strong year-on-year growth. However, at the core level, growth should be positive as RHB Research expects second quarter core profit to be around RM20.23 million.

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