Bursa’s weak results reflect gloomy stock market

Author: bicarajutawan | Category: Uncategorized

KUALA LUMPUR: Bursa Malaysia Bhd’s dismal second-quarter results released yesterday were in a way a reflection of the current malaise in the local stock market.

The benchmark KL Composite Index is down 26% year-to-date from its peak in January and most investors are keeping away from the equity market due to uncertainties in the global economy and domestic political scene.

Chief executive officer Datuk Yusli Mohamed Yusoff told a press conference yesterday the exchange operator would probably miss its own key performance indicator target set earlier this year.

The stock exchange’s share price took the worst beating among blue-chip companies this year, down 54% since January at yesterday’s close of RM6.55.

Bursa Malaysia earns the bulk of its income from fees charged on trading of shares on the exchange. As trading volume dries up, its income shrinks in tandem.

For the first half ended June 30, Bursa Malaysia’s net profit was halved to RM70.7mil compared with RM135mil in the previous corresponding period.

Yusli attributed the decline to dwindling trading volume amid bearish market sentiment. “If the situation does not improve, the stock market will continue to be lacklustre,” he said.

Average daily market turnover in the second quarter was RM1.2bil compared with RM1.9bil recorded in the first three months of the year. It peaked at RM2.6bil in the first quarter of 2007.

Handouts given at the briefing yesterday also showed that retail investor participation in the market had fallen to the lowest levels since at least 1993.

Retail investors accounted for just 24% of total trade value on Bursa Malaysia during the first six months of 2008. It was at 37% for the whole of last year and was as high as 59% in 1999.

The exchange data showed that “short-term traders and retail players are staying on the sideline,” Yusli said. Foreign investor interest remained stable, he said, as “they accounted for about 40% of daily trade volume”.

The lack of trading interest from traders and retailers contributed to the lower stock market velocity, which had dropped to 38% as at June 30 from 46% in the preceding quarter.

The exchange hoped to achieve a steady 56% market velocity this year. Market velocity is a measure of how often a market turns over its value.

Meanwhile, the weak market sentiment had also affected the number of companies seeking listing on Bursa Malaysia.

Yusli said the exchange saw 14 initial public offerings launched during the first half, and was keeping its target for 30 new listings for the year.

However, he noted that some companies would probably delay their listing plans due to the weak market.

[Source: The Star]

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