KUCHING: Bursa Malaysia Bhd (Bursa Malaysia) will likely see a softer third quarter of the financial year 2017 (3QFY17) on expectations of a lower daily average trading value (DATV) for equities as well as a softer derivatives revenue as market volatility has been trending lower.
In a report, the research arm of AmInvestment Bank Bhd (AmInvestment Bank) noted that for 3QFY17, the DATV was lower for equities, while on a quarter to date (QTD), DATV for equities has tapered to RM1.86 billion.
It added that this was lower compared to RM2.62 billion and RM2.38 billion in 2QFY17 and 1QFY17 respectively, while year to date (YTD), DATV for equities was RM2.37 billion.
It also pointed out that while foreign fund flows have been strong in the first half of FY17 (1HFY17), cumulating in RM10.7 billion, in 3QFY17, foreign fund inflows have declined with cumulative inflows of RM571 million QTD.
On the other hand, it said, July 2017 saw the securities market foreign ownership rising further to 23.4 per cent from 23 per cent in June 2017.
“We expect Bursa’s 3QFY17 to be lower than the RM59.5 million in 2QFY17 and RM56.6 million in 1QFY17.
“This is based on expectation of a lower DATV for equities than the first two quarters of FY17 as well as a softer derivatives revenue as market volatility has been trending lower.
“Based on the run rate of DATV for equities in 3QFY17 thus far, we expect the following quarter’s earnings to come in between RM50 million and RM51 million,” it opined.
Meanwhile, on the effective clearing fee rate (ECFR) for the securities market, AmInvestment Bank noted that the ECFR rose slightly to 2.34 basis points (bps) in 2QFY17 (an increase from 2.32bps in 1QFY17).
“This was contributed partly by an improvement in retail trades. The mix of retail to total equity trades was 24 per cent, a marginal improvement from 23 per cent in 1QFY17.
“Meanwhile, the percentage of institutional trade comprised 77 per cent of the total trading participation in 2QFY17 compared with 76 per cent in 1QFY17,” it said.
While there have been efforts to raise the percentage of retail trades and improve the ECFR, the research team noted that the mix of trading participation for equity is unlikely to change significantly in the near term.