Bursa’s average daily trading volume surges
- Markets
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Tuesday, 02 Apr 2024
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PETALING JAYA: Improved average daily trading volume (ADTV), signs of stabilising growth in China and foreign fund inflows driven by the expectation of rate cuts in the United States, are key factors buoying the optimism on Bursa Malaysia Bhd
’s performance for the first quarter of 2024 (1Q24).
Tradeview Capital chief executive officer and founder Ng Zhu Hann said the local bourse’s ADTV surged by 38% year-on-year (y-o-y) in 1Q24, averaging at around RM2.9bil.
He stated the ADTV growth recorded in 1Q24 mirrored that of 3Q21 and represented a robust and healthy transactional volume.
“This bodes well for Bursa simply because its revenue is derived from active or vibrant market activity. Hence, if ADTV increases, naturally this means that Bursa will enjoy higher income from higher transactional activities,” he told StarBiz.
Ng noted that the improved ADTV is supported by foreign fund inflows during the first two months of the year. Additionally, local institutions contributed to the buying momentum in March, when foreign investors turned to net sellers in the last few weeks.
“In January and February, the ADTV was largely supported by fund inflows from foreign investors. This was contrary to last year, where they had been net sellers. Buying was due to the local market being undervalued and the depreciation of the ringgit, which made Malaysia very attractive to foreign funds. This helped to push up the market.
“Foreign funds became net sellers in March. However, local institutions were net buyers and this offered support to the ADTV. Meanwhile, retail participation remained stable.
“Combining these three factors, net net there is more inflow than outflow in the local stock market, contributing to the upward performance of the ADTV,” he said.
MIDF Research said in a fund flow report (for the week ended March 29) yesterday that foreign selling of local equities extended for the fifth week, with an increased outflow of RM435.1mil last week, representing a 39% increase from the RM313.8mil recorded in the previous week.
The research house also noted that the three-day net buying streak by the foreigners ended on Monday (March 25), amounting to RM13.7mil.
In contrast, local institutions persisted in their net buying trend for the fifth consecutive week, with a net purchase of RM587.7mil.
Unlike foreign investors, they recorded a net selling of RM11.9mil on Monday (March 25), followed by net buying of RM599.6mil from Tuesday to Friday (March 26 to 29).
China’s industrial upswing in March is the latest indicator of its economic recovery, with the Caixin manufacturing purchasing managers’ index (PMI) climbing to 51.1 on Monday, surpassing the crucial 50-point mark that separates expansion from contraction.
This indicates expansion for the fifth consecutive month, the longest streak in over two years.
Ng said in essence, China’s significance as a major market and economic powerhouse in the region cannot be denied.
“If China does well, our stock market will, also, and our economy will grow as well, given that China is our largest trading partner. While the improvement in its PMI reading is a good sign, it still remains to be seen whether this will be sustained and we need to continue to monitor the situation closely.
“If this positive trend persists, marking the start of the long awaited recovery in China, it will undoubtedly lift up Asian indices, including the FBM KLCI, which in turn will benefit Bursa Malaysia as well,” he said.
Over in the United States, though price pressures are subsiding, the pace has slowed from the first half of last year, inflation remains above the US central bank’s 2% target. However, it was reported that the Fed said February’s inflation data was more along the lines of what it wants to see.
“As inflation comes off, the Fed may start to implement rate cuts and this will result in more flow of liquidity and cheaper cost of capital. You will see more capital and foreign funds returning back to Asia, and this will also benefit Malaysia,” Ng said.
Fortress Capital Asset Management Sdn Bhd chief executive officer Thomas Yong said the Bursa Malaysia equity market started the year well with vibrant activities, as local thematic plays attracted meaningful foreign participation in the local market.
“The ADTV surged in January 2024 compared to previous months. Although volume slowed down slightly as we entered the Chinese New Year and fasting month, the performance of Bursa Malaysia in 1Q24 has been better than 4Q23,” he told StarBiz.
Yong said improvements in major economies would drive the external demand of the country, which would in turn lead to better corporate earnings.
He added that any improvement in the fundamentals of Malaysian listed equities shall attract more investors and would likely lift the outlook of Bursa Malaysia, as trading activities increase correspondingly or as the frequency of initial public offerings (IPOs) increases.
“Apart from the development of fundamentals, improvement in major market sentiment should also have a positive knock off effect on the volume of Malaysian market’s trading activities as well, hence benefitting Bursa’s outlook,” he said.
Bursa is targeting to hit 42 IPOs this year despite falling short of its 2023 target of 39 listings. Earlier this year, the local bourse said this year’s goal is supported by 24 IPO applications which are already in the pipeline.
Rakuten Trade head of equity sales Vincent Lau said the ADTV and IPO activity will be key factors underpinning Bursa’s performance and outlook.
“A growing ADTV and a strong IPO pipeline augurs well for Bursa Malaysia and the broader stock market. Bursa’s 2024 IPO goal is achievable and there is a possibility that Bursa can even exceed its target, which will boost more trading activities,” he said.
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