KUALA LUMPUR, Jan 7 (Bernama) -- Bursa Malaysia’s benchmark index rebounded from earlier losses to close at its intraday high on Wednesday, gaining 0.27 per cent in late trading as buying interest returned to selected heavyweights. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 4.48 points to 1,676.83 from Tuesday’s close of 1,672.35. The benchmark index opened 0.88 of-a-point lower at 1,671.47 and subsequently hit a low of 1,665.94 during the mid-morning session before gaining momentum toward closing. On the broader market, losers led gainers by 565 to 512, while some 526 counters were unchanged, 1,046 untraded, and 10 suspended. Turnover improved to 2.73 billion units worth RM2.76 billion versus Tuesday’s 2.66 billion units worth RM2.76 billion. Dealers said that investors were cautious following geopolitical developments in Asia.
On Wednesday (2nd March), Macquarie Equities Research (MER) released a research report, discussing data on the loan and deposit growth for Malaysia for the month of January. The report highlighted that the overall non-performing loans (NPL) in Malaysia increased 0.8%, mainly contributed by real estate & construction and auto financing. MER also expressed their defensive view on the Malaysian banks while stating Public Bank as their top pick in Malaysia.
Read on excerpts from the report titled “Singapore loans contracted while Malaysia asset quality worsened” below…
Event
• Bank Negara Malaysia (BNM) released loan and deposit growth data for Malaysia for January 2016.
• In Malaysia, asset quality trends were negative. Non-performing loans (NPLs) increased 0.8% MoM mainly driven by real estate & construction, and auto financing. The uptick in real estate & construction NPL was mainly due to slowdown in property sales leading to cash flow problems for property developers. NPL coverage ratio continued to decline, as banks did not build up provisions during the month.
Impact
• Key takeaways for Malaysia – Total system loan growth in January 2016 was 7.7% YoY (0.1% MoM) which compares to system deposit growth of only 0.9% YoY (-0.8% MoM). The interesting points in January 2016 were: (i) NPLs for real estate & construction was up 14.0% MoM, bringing the NPL ratio for that segment to the highest level since 2012; (ii) NPL for auto financing loans increased 10.5% MoM, while unsecured loans continued their uptrend for 5 consecutive months; and, (iii) the NPL coverage ratio declined 60bp MoM to 95.6%, which is worrying at this stage of the credit cycle.
Outlook
• MER believes asset quality trends – rather than topline growth – will be the share price driver for banks going forward. MER has a strong preference for banks with a strong asset quality track record and a quality balance sheet.
• In Malaysia, MER is defensively positioned and have Public Bank as MER’s top pick, due to its strong asset quality track record, quality balance sheet and strong cost efficiency profile.
Source: Macquarie Research - 04 Mar 2016
Read on excerpts from the report titled “Singapore loans contracted while Malaysia asset quality worsened” below…
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| Public Bank Bhd |
• Bank Negara Malaysia (BNM) released loan and deposit growth data for Malaysia for January 2016.
• In Malaysia, asset quality trends were negative. Non-performing loans (NPLs) increased 0.8% MoM mainly driven by real estate & construction, and auto financing. The uptick in real estate & construction NPL was mainly due to slowdown in property sales leading to cash flow problems for property developers. NPL coverage ratio continued to decline, as banks did not build up provisions during the month.
Impact
• Key takeaways for Malaysia – Total system loan growth in January 2016 was 7.7% YoY (0.1% MoM) which compares to system deposit growth of only 0.9% YoY (-0.8% MoM). The interesting points in January 2016 were: (i) NPLs for real estate & construction was up 14.0% MoM, bringing the NPL ratio for that segment to the highest level since 2012; (ii) NPL for auto financing loans increased 10.5% MoM, while unsecured loans continued their uptrend for 5 consecutive months; and, (iii) the NPL coverage ratio declined 60bp MoM to 95.6%, which is worrying at this stage of the credit cycle.
Outlook
• MER believes asset quality trends – rather than topline growth – will be the share price driver for banks going forward. MER has a strong preference for banks with a strong asset quality track record and a quality balance sheet.
• In Malaysia, MER is defensively positioned and have Public Bank as MER’s top pick, due to its strong asset quality track record, quality balance sheet and strong cost efficiency profile.
Source: Macquarie Research - 04 Mar 2016
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