Derivatives strength to cushion Bursa Malaysia's Q3 earnings

KUALA LUMPUR: Bursa Malaysia Bhd is anticipated to maintain relatively stable earnings in the third quarter (Q3) of 2026, backed by heightened derivatives trading activity and extra trading days. Hong Leong Investment Bank Bhd (HLIB) anticipates Bursa Malaysia's slightly weaker average daily trading value (ADV) in Q3 2026 to be countered by a higher average daily contracts (ADC) from derivatives.

HLIB predicts Bursa Malaysia's quarterly earnings for the period to be RM70 million, resulting in a total of RM215 million for the nine months of 2026, which is 75% or 76% of their consensus full-year forecast.

Bursa Malaysia is set to disclose its Q3 2026 results on October 28. HLIB incorporated the anticipated quarterly decline in ADV into their full-year estimate of RM3.05 billion, which they believe is still feasible considering the year-to-date ADV of RM3.18 billion. They have identified several factors that could bolster ADV, including the growth of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI), the 16th General Election (GE16), and a potential downgrade of Indonesia by MSCI.

HLIB maintains a 'Buy' rating on Bursa Malaysia, although their target price has been revised to RM9.38. Despite year-to-date ADV matching the annual high post-pandemic in 2024, Bursa Malaysia's market capitalisation-to-ADV ratio is still 0.3 standard deviation below the post-global financial crisis average.