Public Bank, Hong Leong, BIMB to benefit from GST abolishment — Analysts

KUCHING: Public Bank (Public Bank Bhd), Hong Leong Bank ( Hong Leong Bank Bhd) and BIMB Holdings Bhd (BIMB) have been identified by analysts as banks who are set to benefit from the impending abolishment of the goods and services tax (GST) and reinforcement of fuel subsidy.

According to AmInvestment Bank Bhd ( AmInvestment Bank), the fundamentals of banking stocks are expected to remain intact with the domestic economic growth still expected to be on positive trajectory notwithstanding a change in the government.

AmInvestment Bank noted that despite the knee-jerk reaction to the prices of banking stocks on Monday, the reforms to be undertaken are expected to have a positive impact on the economy and the sector in the longer term.

“In the short term, sentiment is expected to be more positive on banks with low beta and those that have strong consumer banking franchise,” the research firm said.

“These are Public Bank, Hong Leong Bank and BIMB Holdings which are anticipated to benefit from the potential improvement in consumer spending as a result of higher disposable income from the impending abolishment of the GST and reinforcement of fuel subsidy.”

AmInvestment Bank had rolled forward its valuations for banks with the financial year ending December from financial year 2018 (FY18) to FY19.

The research firm had factored in slightly higher risk premiums into the valuations of CIMB Group Holdings Bhd (CIMB), RHB Bank Bhd (RHB Bank) and Malayan Banking Bhd (Maybank) to account for uncertainties in capital market activities for infrastructure projects which may see a delay in the issuance of bonds or sukuks.

“This is in view of the fact that the major public projects will be reviewed by the new government,” it said.

“Meanwhile, the asset quality for banks’ domestic operations is expected to remain stable while that of the overseas operations is anticipated to gradually improve.”