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18th July, 2008
KUALA LUMPUR: Bursa Malaysia Bhd’s financial result for the first half of this year (1H) was dampened by a decrease in trading revenue from the equity market as a result of continuing global and domestic uncertainties and inflationary pressures in the second quarter of 2008.
For the six months period ended June 30, 2008, the stock market operator registered a lower pre-tax profit of RM96.331 million as compared with RM185.966 million for the same period last year.
Revenue was also lower at RM186.928 million compared with RM266.46 million previously, it said in a statement here, yesterday.
Bursa Malaysia said the Malaysian equity market remained lacklustre during the first half of this year being continually challenged by the slowing US and global economy, rising crude oil, commodity and food prices, and domestic uncertainties.
The stock market operator said it was cognisant of the global and domestic economic climate in which it was currently operating and, as such, acknowledge that it will be very challenging for the group to achieve its targets.
Investor sentiment is expected to continue to be cautious for the remainder of the year even though some measure of stability is expected on the local scene.
The Malaysian derivatives market is driven mainly by interest in two products – the Kuala Lumpur Index Futures (FKLI) and the Crude Palm Oil Futures (FCPO).
Interest in FKLI contracts is expected to move in tandem with the expectations in the equity market, while interest in FCPO contracts is expected to be guided by expectations of supply and demand of CPO, price of substitute products and environmental issues.
Trades on the Financial Market Trading Platform which was launched on March 10, 2008 is not expected to bring in significant income in the current year due to certain fee waivers and the availability of over-the-counter interbank money market for bond trading.
It said although the equity market is comparatively bearish and the derivatives market has remained constant and not seen the expected growth in the current year, the Group will continue its efforts to enhance the competitiveness and ensure the growth of the Malaysian equity and derivatives markets.
The group, it said will maintain its focus to introduce infrastructures which will afford better transactional efficiency, such as Bursa Trade Securities and Direct Market Access – Derivatives.
“The group will also focus on the launching the USD CPO futures (FUPO) and will continue with its education of the retail market.”
The intiatives to enhance infrastructure are expected to increase depreciation and amortisation, while the launch of FUPO and retail market education are expected to increase market development costs.
Nevertheless, Bursa will continue to maintain its cost-conscious approach while balancing the need for initiatives with long term benefits and a capable and motivated workforce.
The group recorded a profit attributable to equity holders of the company of RM70.7 million for the half-year period reviewed, 48 percent lower compared to the profit of RM135.2 million for the first half of 2007.
The equity market recorded a velocity for on market traders (OMT) of 38 percent during the same period compared with 61 percent in the corresponding period of last year and a daily average trading value for OMT and direct business trade (DBT) of RM1.7 billion as compared with RM2.7 billion in the first half of 2007.
“The poorer market performance and the revision in the clearing fee structure from Jan 1, 2008 resulted in a decrease in equity trading revenue of 48 percent to RM84.8 million in 1H 2008 compared with 1H 2007,” it said.
Bursa said total expenses increased by 13 percent to RM90.3 million in 1H 2008 as compared to the same period last year mainly due to higher professional fees, depreciation and amortisation, market development expenses, impairment on investments in private debt securities and staff costs due to annual increments.
Bursa said the derivatives market also recorded a decrease in the total number of contracts traded to 3.08 million contracts in 1H 2008 from 3.24 million contracts in 1H 2007, resulting in a decline in trading revenue from the derivatives market by seven percent to RM22.0 million in 1H 2008 as compared with the first half of 2007.
The growth in stable revenue by 14 percent to RM53.5 million during the period was primarily due to higher listing fees and information services fees.
Other income decreased by 16 percent to RM22.8 million in 1H 2008 compared to 1H 2007 mainly due to lower investment income but was was partially offset by higher rental income.
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