TEMPORARY HICCUPS
Investors may be temporarily spooked by news of potential resignations at GLCs
LOCAL bank stocks are likely to see further price correction as news of potential resignations of top executives at government-linked companies spooks investors. However, analysts expect price recovery once there is more certainty.
BANKING stocks have mostly seen a reversal of fortune over the past three months, succumbing to volatility in the market, said analysts.
Banking stocks could fall further as investors were spooked by news of potential resignations of top executives at governmentlinked companies (GLCs), they said.
Affin Hwang Capital, which remains “overweight” on the sector, said banking stocks under its portfolio had seen a big price correction recently.
It said Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd and Public Bank Bhd had seen the largest price corrections in the past month.
But on a 12-month basis, the share price of Public Bank was still up 12.4 per cent vis-a-vis negative returns for Maybank and CIMB.
Maybank shares declined 32 sen, or 3.56 per cent, to RM8.68 yesterday, its lowest year-todate. It hit a high of RM10.88 on May 21.
CIMB, which hit a year-to-date high of RM7.31 on May 19 and a low of RM5.39 on Tuesday, rose 0.19 per cent, or one sen, to RM5.40 yesterday.
Public Bank, which rose 0.87 per cent, or 20 sen, to RM23.10 yesterday, had hit a year-to-date high of RM25.20 on May 22 and low of RM20.74 on April 18.
“At this juncture, we think earnings risk will be the biggest threat to our price targets. Otherwise, we believe that investors’ reaction to news of potential resignations of chief executive officers at GLCs may be temporary and we expect share price recovery once there is more certainty with regards to news flows,” said Affin Hwang in a report yesterday.
“Our Malaysian banking universe saw profit-taking activities on a few large capitalisation names in particular.”
It said there might some mergers and acquisitions (M&As) among the smaller-capitalised banks.
“Should valuations stay low for certain banks, we are of the view that industry M&A activities could emerge, driven by the larger-sized banks with more robust return of equity levels.”
Affin Hwang’s top picks are Maybank and Aeon Credit Service (M) Bhd.
“Other financial stocks which saw recent pullback include Alliance Financial Group Bhd, Hong Leong Bank Bhd and Aeon Credit, but given their strong fundamentals, we believe that this presents a buying opportunity,” it said.
Public Bank’s high foreign shareholding of 39.1 per cent, however, might present downside risks to the stock price, added Affin Hwang.
Moody’s Investors Service said in its latest report the outlook for Malaysian banks would remain stable on robust macro conditions and improving capitalisation.
The rating agency said revenue improvements, driven by faster loan growth, would underpin the banks’ profitability profiles.