Bursa Malaysia net profit down 36% in 2022 due to lower revenue and higher expenses

[KUALA LUMPUR] Bursa Malaysia’s net profit for 2022 declined 36 per cent year-on-year to RM226.6 million (S$70 million), but its chief executive officer Muhamad Umar Swift remains confident that with continuous investments to develop new business, the exchange can improve on its performance this year.

The fall in Bursa’s net profit was due to lower overall trading revenue and higher operating expenses, he told reporters at a briefing on Tuesday (Jan 31).

Overall trading revenue decreased nearly 31 per cent to RM377.1 million, while operating expenses increased by 1.4 per cent to RM292.7 million because of higher marketing expenses to roll out new products or platforms.

Trading revenue dropped 40.5 per cent to RM263.5 million due to a lower average daily value (ADV) traded for securities market’s on-market trades and direct business transactions.

Trading velocity in 2022 slowed to 30 per cent, compared to 35 per cent in the same period in the previous year.

Bursa’s market capitalisation decreased by 3 per cent to RM1.7 trillion in 2022.

Nevertheless, the Derivatives Market trading revenue rose by 11.3 per cent to RM97.2 million last year. Umar attributed the improvement to higher collateral management fees and increasing number of future contracts traded – namely Crude Palm Oil Futures and FTSE Bursa Malaysia KLCI Futures.

The Derivatives Market average daily contracts increased 4.6 per cent to 78,621 last year, compared to 75,178 in 2021.

Bursa chairman Abdul Wahid Omar said that the exchange’s performance remained resilient amid challenging global conditions which resulted in the softening of trading in the securities market. For instance, although trading value declined over 40 per cent with an ADV of RM2.1 billion in 2022, it is still higher than pre-pandemic ADV of RM1.9 billion.

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He noted that there is increasing listing interest with a total of 35 initial public offerings (IPOs) recorded in 2022, higher than the 30 in 2021. “These numbers prove that both companies and investors have confidence in Malaysia’s capital market,” he added.

“Looking ahead, short-term market volatility is expected to persist in the coming months. Nonetheless, a number of positive and domestic catalysts could boost market sentiment, potentially providing further fundamental support to the domestic market in the medium-term,” said Wahid.

As part of the efforts in creating vibrancy to the trading market, Umar said that the exchange will keep on broadening its product offerings such as strengthening its initial public offerings pipeline and launching innovative products or platforms to meet emerging needs.

“This includes the launch of Bursa Gold dinar, commercialisation of new debt fundraising solutions for small and medium enterprises, as well as the rollout of the Bursa Carbon Exchange,” he added.

With this, he said that Bursa is transforming into a multi-asset exchange and able to diversify its revenue streams as well as facilitate the country in becoming a global ESG investment destination via the Bursa Carbon Exchange.

Elaborating on the IPO listings, Umar expects that there will be a total of 39 listings on Bursa this year, raising at least RM10 billion in total. This target is higher than last year’s 35 IPOs that raised RM3.5 billion. Currently, there are seven approved IPOs in the pipeline, said Umar.