Published December 30, 2008

Bursa Malaysia hopes for derivatives cheer

Outlook for derivatives seems brighter in 2009 while equities market's prospects looks uncertain as turmoil continues: CEO

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(KUALA LUMPUR) Stockmarket operator Bursa Malaysia Bhd expects its derivatives revenue to increase next year, even as the equities market outlook remains uncertain because of the global market turmoil, Malaysia's Business Times reported yesterday.

'We are hoping that the derivatives market will do better next year. So far this year, we have seen that the derivatives volume has been much (more) stable,' chief executive officer Yusli Mohamed Yusoff told the financial daily in an interview here.

Bursa Malaysia's revenue from equities trading, which represents more than half of the group's total sales, took a beating in the first nine months of this year amid the unexpected general election outcome and the global financial meltdown. It fell 54 per cent to RM110.9 million (S$47.3 million) in that period.

Meanwhile, its revenue from derivatives trading, the group's third largest contributor, fell marginally to RM33.3 million from RM34.8 million. Mr Yusli believes that it is only a matter of time before trading volume for the derivatives market picks up again.

'As you know, we have launched direct market access for derivatives. We expect the amount of volume to increase over time. We also expect the interest in the crude palm oil futures contract to continue to grow because it has become more and more popular,' he said.

While the future for derivatives seems bright, it is less rosy for the equities market. Mr Yusli warned that the company, which saw earnings and revenue fall by more than 52 per cent and 35 per cent respectively in the nine months, could experience an even worse year ahead.

'If the global economic situation does not improve, (or) a sign of recovery does not appear maybe within the next few months, then potentially 2009 will be worse. What is important is for people to be able to see the bottom because we will then know that things will start getting better.

'I think the assumption for today is that nobody is quite sure if we have hit the bottom, or when the bottom will be reached. Hopefully, that will happen over the next few months,' he said.

The benchmark Kuala Lumpur Composite Index has fallen by more than 40 per cent so far this year, while the market capitalisation of the entire stock exchange has depreciated by more than 38 per cent.