Hong Leong Investment Bank (HLIB) has commented that Bursa Malaysia is expected to benefit from the higher retail participation and potential return of foreigners as they will help boost the average daily trading volume (ADTV).

In line with this opinion, HLIB analyst Jeremy Goh said that the research house has raised the earnings projections for Bursa Malaysia in 2021 and 2022 by 4% and 8% respectively. At present, he said that the bourse’s estimated earnings for the first quarter of 2021 (1Q21) are shown to have dipped slightly from the previous quarter.

However, a year-on-year (YoY) comparison showed that the estimated 1Q21 core earnings saw a 66.9% hike from 1Q20 as ADV doubled. Additionally, Goh said that HLIB expects trading to improve again in the second half of 2021 (2H21) due to the lifting of the ongoing state of emergency on 1 August 2021.

Goh went on to emphasise the role of average retail participation, which is expected to remain strong during this period, thereby lending support to the market. “Average retail participation in 1Q21 stood at 39.3%, while the retail ADV was at RM1.99 billion alongside net buys of RM5.36 billion. We believe that retail participation is now on a structurally higher base with the average participation rate at 39.6% post automatic loan moratorium versus the 10-year pre-Covid mean of 24%,” he commented.

On top of that, HLIB also anticipates the return of foreigners in shareholding to contribute to Bursa Malaysia’s recovery. This is despite foreign shareholding clocking in a record low even at the end of March 2021.

“We reckon green shoots are emerging with 4Q20 versus 1Q21 numbers, seeing foreign participation rising from 15% to 16.7% and their net selling tapered from RM2.29 billion to RM1.73 billion. At current foreign shareholding levels, we reckon the base appears palatable to envision their re-entry, especially if they turn ‘risk on’ amid a vaccine-driven recovery climate,” said Goh.

That said, HLIB also cautioned that Bursa Malaysia’s road to recovery will remain unpredictable due to various reasons. “We maintain our consensus view that 2021 will be a vaccine-led recovery year. However, speed bumps such as vaccine hiccups, Covid resurgence, geopolitical tensions that are between the US and China, and fluid domestic politics will bring much volatility along this recovery path, possibly inducing heightened trading activity,” explained Goh.

For context, Bursa Malaysia saw a significant increase in the participation of domestic retail investors in 2020, driven primarily by the convenience of online broking and a low-interest-rate environment. Meanwhile, there was a plunge in foreign shareholding, with these investors actively selling throughout last year on the bourse.

(Source: The Malaysian Reserve)

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• Bursa Malaysia
• Hong Leong Investment Bank
• Jeremy Goh
• Retail Investors
• Shares
• Stock Market
• Stock Trading
• Stocks