Monday, September 12, 2011

HL Bank, HLFG down, weigh in KLCI

KUALA LUMPUR: Shares of Hong Leong Bank and Hong Leong Financial Group slipped in mid-morning on Monday, Sept 12 in line with the weaker markets and expectations of lower economic growth.

At 10.31am, HL Bank was down 40 sen to RM11.80 with 43,100 shares done while HLFG slipped 30 sen to RM11.22. The slide in the shares also was due to expectations of lower earnings ahead.

The FBM KLCI tumbled 19.12 points to 1,450. Turnover was 156.81 million shares valued at RM160.19 million. The broader market was weak with 362 losers to 59 gainers while 121 stocks unchanged.

OSK Research said in a recent report that while it does not expect a major meltdown in asset quality or liquidity constraints, it expects sector earnings growth momentum may have slowed significantly, as reflected in the industry's paltry pre-provision operating profit growth of 1.7% in 1CY2011.

'With growth expected to ease even more in 2012, we think that earnings could disappoint consensus' current double-digit earnings growth forecasts for 2012 given the global economic headwinds,' it said.

The research house said although the sector valuations are not excessive compared with its near record high returns on equity (ROE) of 15.8%, earnings and hence ROE are lagging indicators.

'Spikes in loan loss provision typically lag the GDP trough by nearly 6 to 9 months. We view the upcoming quarterly earnings potential under-performance and downgrades as possible catalysts for a further de-rating in sector valuations,' it said.

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