KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Malaysia’s recent interest rate cut will likely hurt smaller banks the most, according to analysts, due to their heavier reliance on interest income from loans compared to larger, more diversified peers.
Banks Most at Risk:
Bank Islam Malaysia (BIMB)
Alliance Bank Malaysia (ABMB)
Both are highly exposed due to a large share of floating-rate loans.
Alliance Bank, for example, has 84% of loans under variable rates, making it especially vulnerable to margin compression.
Why Smaller Banks Are Feeling the Pinch:
Lower Overnight Policy Rate (OPR) reduces net interest margins (NIMs).
Interest on floating-rate loans drops immediately, but deposit rates adjust more slowly.
Fierce deposit competition keeps pressure on interest expenses.
Reduced operating leverage and less income diversification make smaller banks more sensitive to rate cuts.
Analyst Adjustments:
Public Investment Bank slashed banking sector earnings forecasts by 3%–4%.
RHB Research highlighted Bank Islam’s exposure due to its large CASA (current account-savings account) ratio and floating-rate loan mix.
“Although lower rates should boost credit demand, slower economic growth from trade uncertainties may offset any loan growth,” said Public Investment Bank.
Policy Moves in Context:
Bank Negara Malaysia (BNM) reduced OPR to 2.75% on Wednesday.
Also cut the statutory reserve requirement to 1%, a 14-year low, injecting RM19 billion in liquidity.
This measure is expected to ease pressure on banks, but only partially offset the earnings impact from the rate cut.
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