PETALING JAYA: Bursa Malaysia’s average daily value (ADV) is expected to strengthen in the second half of 2023 (2H23), driven by increasing risk sentiment and volatility on global equity markets, say analysts.

UOB Kay Hian (UOBKH) Research predicts that the local stock exchange will experience better ADV of RM2.53bil in 2H23, as opposed to RM1.94bil in 1H23, and the momentum will continue into 2024, with the ADV averaging about RM2.4bil.

Bursa Malaysia’s ADV has been trending upwards, rising from RM1.76bil in the second quarter of 2023 to RM2.2bil in August-July 2023, on improving foreign net equity inflows, thus exceeding its historical mean ADV of RM2.1bil.

“It shows that the market sentiment is perking up as reflected by encouraging ADV recovery,” said UOBKH Research in a report on the exchange operator.

It noted that the stock is trading at 23 times its 2024 price-to-earnings (PE), in line with its historical mean.

“However, given the current positive market sentiment, which previously led to a PE valuation increase ranging from a standard deviation of 0.5 to two above its mean, we believe the current risk-to-reward profile favours the upside,” it added.

On the back of a more pronounced global stock risk-on mood as the US interest rate cycle peaks, UOBKH Research expects a favourable price action supported by both valuation re-rating and ADV recovery beyond 2024.

It maintained a “buy” call on Bursa Malaysia with a target price of RM7.85 per share.