KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
Bank Negara Malaysia (BNM) has taken a surprise pre-emptive step, cutting the Overnight Policy Rate (OPR) by 25 basis points to 2.75%. While this may slightly dent bank earnings (1%-4% hit to net interest margins), analysts at Kenanga maintain an OVERWEIGHT rating on the Malaysian banking sector—and here's why that’s a buying signal, not a warning.
Key Takeaways for Investors:
Resilience in a Lower-Rate Environment
Despite the NIM compression, asset quality remains strong (industry GIL <1.5%), and the sector still expects earnings growth of 3-4% in 2025. Sector dividend yields of 5%-6% also add to the cushion, offering reliable income in uncertain markets.
Valuation Bottoming Out
Kenanga notes that sector valuations are near historical troughs (at -1SD PBV within a 10-year band). That implies limited downside and room for upside if economic sentiment recovers.
Top Bank Picks
Kenanga’s high-conviction BUYs in this new rate environment are:
🏦 AMBANK (TP: RM6.90) – Stronger ROE focus post-FIRB conversion. Attractive dividend yield (~6%) backed by CET-1 levels of 15%.
💰 CIMB (TP: RM7.90) – Oversold due to Indonesia worries; high dividend yield (~6%) and potential for capital gains as foreign investors return.
🟨 MAYBANK (TP: RM12.00) – A long-term growth engine with market-leading asset quality (GIL 1.27%) and scale to capitalise on any rebound.
Casualties and Catalysts
Retail-heavy banks (like PBBANK, HLBANK) face more pressure from margin compression.
CASA-rich banks (like CIMB, AMBANK, BIMB) will handle lower rates better than fixed-deposit-heavy peers.
MBSB and AEONCR could benefit from falling borrowing costs due to their fixed-rate lending models.
Market Reads Between the Lines:
Kenanga simulations suggest investors may be underestimating loan growth potential, pricing in just 3.5%—akin to pandemic lows. Yet the macro backdrop, supported by steady consumer demand and stable credit quality, doesn’t justify that pessimism.
Investment Call: Stay Overweight
BNM’s move signals caution, but the underlying fundamentals of Malaysia’s banking sector remain sound. Investors should focus on dividend-rich, scalable banks with strong balance sheets and ROE momentum—just like Kenanga’s top picks.
Comments
Post a Comment