Broker: UOB Kay Hian
Date of Report: 30 July 2025

Bursa Malaysia 2Q25 Results: Muted Trading Volumes and Cautious Sentiment Shape Outlook for 2026

Executive Summary: Bursa Malaysia Delivers In-Line Results Amid Soft Market Activity

Bursa Malaysia Berhad, Malaysia’s fully integrated stock exchange, has reported its second-quarter 2025 financial results, which broadly align with analysts’ expectations. Muted average daily trading values (ADV) and cautious investor sentiment have weighed on earnings. However, the outlook points to a modest recovery, spurred by potential Fed rate cuts and a gradual return of risk appetite. UOB Kay Hian maintains its HOLD rating, with a revised target price of RM7.87, reflecting updated 2026 valuations.

Stock Snapshot: Bursa Malaysia at a Glance

• Share Price: RM7.66
• Target Price: RM7.87 (Up from RM7.29)
• Market Capitalization: RM6,199.2 million (US\$1,462.8 million)
• Shares Issued: 809.3 million
• Sector: Financials
• 52-Week High/Low: RM9.96 / RM7.20
• Major Shareholders: Capital Market Development Fund (18.6%), EPF (13.9%), Kumpulan Wang Persaraan (11.2%)

Recent share price performance has been subdued, down 22.1% over the past year and 13.7% year-to-date, reflecting the broader market’s cautious stance.

2Q25 Financial Performance: Earnings Decline as Trading Volumes Soften

• 2Q25 net profit declined 29% year-on-year and 16% quarter-on-quarter, with first half 2025 earnings down 20% year-on-year.
• The drop was mainly due to a 15% fall in securities trading revenue, triggered by a 25% decrease in ADV (to RM2.44 billion), partially offset by an 8% rise in derivatives revenue.
• Stronger market data (+11% yoy) and derivatives revenue (+3% yoy), led by a 12% increase in FCPO volumes, helped cushion the decline.
• US tariff uncertainties dampened sentiment, pushing market velocity down to 30% from 33% in 1Q25.

Key Financials: 2023-2027 Forecast Highlights

• Dividend payout ratio is expected to remain very high at 95% through 2027.
• Net cash position remains robust, with net debt to equity forecast to improve further, reaching -80.7% by 2027.

Stock Impact: Current Trends and Market Outlook

• ADV for July 2025 has stabilized at RM2.3 billion, matching 2Q25 levels and closely tracking the full-year forecast of RM2.38 billion.
• A modest ADV rebound is anticipated, with forecasts for 2026 set at RM2.53 billion, slightly above the 15-year mean of RM2.30 billion.
• Valuations reflect the expectation of recovery, with Bursa trading at 22.6x 2026 PE, in line with its 10-year mean.
• For significant upside, a sustained ADV at RM3.0 billion would be required, which could lift the target price to RM8.86, assuming a mean PE of 23.0x.

Historical ADV and market velocity data underscore the volatility in trading activity. Notably, Bursa’s share price peaked at RM9.90 in July 2024 when foreign inflows drove ADV to RM4.0 billion.

Historical Market Velocity, ADV, and Market Capitalization

Forecast Assumptions and Key Metrics

• 2025F ADV: RM2.38 billion
• 2026F ADV: RM2.53 billion
• 2027F ADV: RM2.55 billion
• Futures Contracts (million): 2025F: 18.3, 2026F: 18.9, 2027F: 19.4
• Dividend Payout Ratio (%): 95.0 (2025F-2027F)

Profit & Loss, Balance Sheet, and Cash Flow Forecasts

ESG Initiatives: Environmental, Social, and Governance Updates

• Environmental: Bursa Malaysia targets carbon neutrality by 2022 and zero greenhouse gas emissions by 2050.
• Social: Maintains 42% female representation in senior management; launched a Diversity, Equity and Inclusion (DEI) Policy in 2021 to promote diversity across age, ethnicity, and gender.
• Governance: Board composition features 90% Independent Non-Executive Directors (INED).

Valuation and Recommendation

• HOLD rating is maintained with a higher target price of RM7.87, reflecting 23.0x 2025F PE, as valuations are rolled forward to 2026 in anticipation of improved sentiment from potential Fed rate cuts and a modest recovery in trading activity.
• The current valuation suggests the market is already pricing in a mild recovery, with further upside dependent on a stronger rebound in ADV.

Conclusion: Key Takeaways for Investors

• Bursa Malaysia’s earnings remain closely tied to trading volumes, which are currently subdued but may recover moderately in the coming quarters.
• Dividend yields remain attractive, backed by a high payout ratio and strong cash generation.
• Valuation is fair given the current trading environment, but upside is limited unless trading activity picks up meaningfully.

Investors should monitor macroeconomic developments, global risk sentiment, and the impact of US tariffs as key catalysts that could influence Bursa Malaysia’s trading activity and share price trajectory in the medium term.