‘BANKS TO ATTRACT FOREIGN FUNDS’
Local lenders are defensive stocks against volatile markets, say analysts
THE banking sector, often seen as a proxy for economic growth, could continue to draw foreign funds seeking to sidestep market volatility through to next year as the United States Federal Reserve rates creep up, said analysts.
Clearer market direction after the 2019 Budget announcement and the banks’ sound asset-quality track record would boost loan growth and make them defensive against volatile markets, they added.
They have picked lenders from Malaysia, Singapore and Thailand to outperform other Southeast Asian rivals.
Stock-wise, the analysts are placing their bets on Public Bank Bhd to continue outperforming other Southeast Asian banks and large Asian peers in share price return.
Malaysian lenders were one of the main drivers, other than Taiwanese and Indian, behind Asian banks’ 3.6 per cent outperformance over the MSCI Asia exJapan Index.
Among the top 100 capitalised stocks on Bursa Malaysia, CIMB Group Holdings Bhd registered the highest net foreign fund inflow of RM11.7 million last week, followed by Public Bank with net inflow of RM11.35 million and Hong Leong Bank Bhd with RM10.16 million.
Bloomberg Intelligence senior banking analyst Diksha Gera said Malaysian banks’ peer group had outperformed Southeast Asian rivals, mostly due to Public Bank and Hong Leong’s post-general election rallies.
Infrastructure projects could boost business performance at CIMB and Malayan Banking Bhd, although Malaysia’s economy remained vulnerable to a protracted trade war, she said.
Gera said Public Bank was more defensively positioned to weather potential funding cost pressures, backed by sound assetquality track records.
MIDF Research believes the 2019 Budget would be positive for the country’s banking sector, in particular measures relating to home ownership.
“In our opinion, mortgages will be a key driver to loan growth next year. The budget measures could supplement the growth. Therefore, our positive stance for the sector remains,” it said.
Maybank Investment Bank Bhd (Maybank IB) has raised its loan growth target to 4.9 per cent next year from 4.2 per cent on expectations of faster growth in corporate drawdowns.
The higher revision does not factor in the expectation of higher mortgage growth next year.
“While we do expect a moderation in household loan growth, the rise in working capital lending is encouraging and should provide near term support to growth in non-household lending,” said Maybank IB.