“We expect the market to be buoyant in 4Q09 with the FBM KLCI potentially reaching our target of 1,300 points. We believe that the inclusion of Malaysia into the watchlist for FTSE’s Advanced Emerging Market status will result in a positive impact on the local equity market once upgraded from the current Secondary Emerging Market status,” said MIDF.

The research house noted that the trading value on Bursa Malaysia has increased significantly since March this year.

“The average trading volume between April and August was as high as that during the 2007 and early 2008 market rally,” said MIDF.

In addition to the improving market conditions, MIDF said that the relisting of Maxis Bhd, and the potential listing of other prominent names such as Felda, subsidiaries of Petronas and UMW’s oil and gas unit will increase the attractiveness of the local bourse.

“Bursa’s 40 initial public offering target a year reflects its commitment towards drawing more companies to list on the local exchange,” said MIDF.

The changes implemented by Bursa to promote higher liquidity are  expected to improve investor sentiment towards the local bourse, said MIDF, adding that the increase in the number of foreign company  listings, particularly from China, is a positive sign of progress by Bursa.

The research house is also positive on Bursa’s tie-up with the CME Group.

“The strategic partnership between Bursa Malaysia and the CME Group with the latter acquiring 25% equity interest in Bursa Malaysia Derivatives has been a positive step towards internationalising Bursa and globalising its derivative products. This move will create global visibility by extending the transaction processing of crude palm oil futures globally through CME Group’s trading platform,” stated MIDF.  

According to MIDF, the equity participation by CME Group is expected to be completed in 4Q09 and will result in the divestment gain of RM44 million for Bursa. Listing of CPO futures on CME Globex will commence during the first half of next year and is expected to increase the percentage of Bursa’s derivative revenue to total operating revenue from 15% to 30% over a period of three years.

“In addition, this tie-up provides for further listing of other derivatives products by CME Globex in addition to CPO futures in the future,” said MIDF.

MIDF is expecting Bursa’s net profit for FY2009 and FY2010 to come in at RM149.5 million and RM178.2 million respectively.

Bursa closed at gained eight sen to close at RM8.16 yesterday.

This article appeared in The Edge Financial Daily, September 30, 2009.