Bursa Malaysia net profit down 39.4% in H1, but chairman confident in domestic demand

BURSA Malaysia’s net profit for the first 6 months of 2022 slumped 39.4 per cent year on year to RM127.4 million (S$39.5 million) – but chairman Abdul Wahid Omar is confident that strong domestic demand will continue to support Malaysia’s economic growth and boost stock market performance.

This is even though he noted potential downside risks such as global uncertainties, a worsening Russia-Ukraine conflict, the emergence of Covid-19 variants and the potential escalation of the monkeypox outbreak, which could disrupt global supply chains and erode Malaysia’s recovery efforts.

Bursa Malaysia chief executive officer Muhamad Umar Swift, meanwhile, said the weak ringgit presents an opportunity for investors. Year-to-date, the ringgit has depreciated close to 7 per cent to RM4.45 against the US dollar, and reached a low of RM3.23 against the Singapore dollar.

While there is a risk that the ringgit will deteriorate further, the country’s fundamentals remain healthy, backed by a “strong current account surplus”, said Umar.

“Although there are downside risks, we also have upside potential as analysts in the United States have raised their concerns on the (US Treasury) yield curve inversion. In the medium term, if they (foreign investors) invest in Malaysia, there will be a potential lift in the future,” he said during Bursa Malaysia’s results briefing on Thursday (Jul 28).

The fall in Bursa Malaysia’s net profit for the first half of 2022 was due to lower operating and securities trading revenue. Chief financial officer Rosidah Baharom said the weaker revenue stream was influenced by domestic and global developments, including global inflationary pressures.

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The exchange’s operating revenue slid 26.4 per cent to RM309.4 million. Trading revenue dropped 44.7 per cent to RM147.2 million, as the average daily trading value of securities fell to RM2.46 billion – a decrease of 45 per cent from RM4.51 billion in the first half of 2021.

Trading velocity in the first half of 2022 slowed to 33 per cent, compared to 61 per cent in the same period last year.

The Derivatives Market Average Daily Contracts fell 3.4 per cent to 77,301 contracts, compared to 80,061 contracts in the H1 2021.

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Bursa Malaysia records lower after-tax profit in Q1 on declining operating and trading revenue

But one area of improvement was funds raised through initial public offerings (IPOs), which totalled RM2.1 billion in H1 2022, up from just RM0.4 billion in the year-ago period.

Wahid said that IPOs in the first half of 2022 enjoyed high subscription rates and good price performance, bringing attractive returns to investors. “To-date, we have 22 new listings, and subject to market conditions, we expect this year will have 37 new IPOs,” he added.

Umar said the exchange will continue to actively engage with existing and potential market participants to generate more trading activity.

“We will continue to develop new Shariah-compliant products such as the Digital Gold Dinar and a Shariah-compliant voluntary carbon market, in line with our sustainable and responsible investment and environmental, social and governance agenda,” he added.