- We re-iterate our
BUY recommendation on Bursa Malaysia Bhd (Bursa), with an unchanged fair value
of RM8.20/share, based on a PE of 26x FY13F earnings.
- The Wall Street
Journal (Asia Edition) yesterday reported that the ASEAN Trading Link, which went
live six months ago, has gained little traction among cross-border traders.
- We gather that
Bursa’s foreign retail trading volume has remained at lackadaisical ~400mil shares/month,
while average participation in the past 5 months was ~1% of total traded
volume. The Singapore Stock Exchange and Stock Exchange of Thailand do not
provide monthly figures.
- The link, which
provides a platform for retail investors to ride on the region’s growth opportunities,
currently connects the Malaysia, Singapore and Thailand bourses. These three markets
alone make up 70% of the ASEAN market capitalisation (USD1.6tril). We
understand that the Philippines and both of Vietnam’s bourses could be joining
the fray soon. No timeline has been set for the linkage of all 6 bourses in the
region.
- Despite incentives
like capital-gains tax exemption for shares bought using the link and lower transaction
costs, retail investors are still not keen, citing reasons which include:- (1) unfamiliarity
with the foreign capital markets and its companies; (2) additional forex risk;
and (3) lack of integration in the rules and regulations front. Interest to
diversify is also low on their list as some investors believe the domestic
market provides amply investment opportunities.
- Our previous talks
with management revealed that the alliance’s aim of improving the liquidity of the
region’s capital markets by positioning ASEAN “as an investable asset class” is
a mid- to long-term one. Its immediate goal is educating the investors through
roadshows.
- As stated in our
previous reports, we are neutral on this tie-up as:- (1) any positive
contribution from it will only be seen at the earliest in FY14/15, and (2) the
impact will only be felt by retail investors, which account for a small portion
of trading participation on Bursa (FY12: 23% vs. FY11: 26%).
- Having said that,
we are encouraged by Bursa’s bid to elevate its velocity (FY12: 28% vs. FY11: 33%)
by increasing retail participation, which has been dwindling YoY since its peak
in 2007 of 53%.
Source: AmeSecurities
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