KUALA LUMPUR (April 30): Affin Hwang Capital Research has downgraded Bursa Malaysia Bhd (Bursa) to “Sell” at RM6.90 with a lower target price of RM5.40 (from RM7.65) and said Bursa’s 1Q19 net profit of RM46.9 million (-26.5% y-o-y; - 9.6% q-o-q) was below house and market expectations.

In a note today, the research house said market volatility has been weak at 29% in 1Q19 vs 28% in 4Q18 and 35% in 1Q18.

It said poor market sentiment had resulted in a lower equity average daily value (ADV) of RM2.4 billion (-17.7% y-o-y; +1.5% q-o-q).

It said the derivatives market division also performed poorly, as reflected by a decline in trading volumes of 15.2% y-o-y and 24.2% q-o-q.

“For 1Q19, both the securities market and derivatives market saw a decline in operating profits.

“We downgrade Bursa from Hold to Sell, with a revised Price Target of RM5.40 (at a 25x P/E target on the 2020E EPS) subsequent to a -21%/-22%/-21% net profit cut for 2019E/20E/21E.

“Though we expect a recovery in market sentiment in 2H19, the revision in the settlement date for equity market trading to T+2 is expected to moderate trading volumes significantly,” it said.