Friday, September 23, 2011

Maybank under mild selling pressure, volume up

KUALA LUMPUR: Shares of MALAYAN BANKING BHD [] fell in very active in the afternoon session on Friday, Sept 23, as selling pressure extended to the bank though analysts said the banking group's fundamentals were intact and the banking sector remained sound.

At 3.10pm, Maybank fell 33 sen to RM8.07 with 11.69 million shares done.

The FBM KLCI fell 17.45 points to1,370.36. Turnover was 635.73 million shares valued at RM1.06 billion> Falling stocks beat gainers 640 to 122 while 209 stocks were unchanged.

Hong Leong Bank rights shares or HLBank-OR fell 36 sen to RM1.01 and Hong Leong Financial Group lost 32 sen to RM10.62.

Affin Investment Research said the reality that the selldown in equities have more do to with fear and jitters, and in fact, could be uncontrollable when irrationality sets in.

It said based on the share price behaviour in the 2008 financial crisis, there was still more downside risk, ranging from 20%-54% (based on a - 1 Standard Deviation from mean price-to-book value) for the Malaysian banking stocks, though fundamentals are expected to be largely intact.

'Foreign shareholdings level (ex-strategic stakes) remain high at CIMB, Public Bank and AMMB, estimated at 36.4%, 24.5% and 26.6% respectively and further foreign selldown could be the main factor for causing share price to decline further. Notwithstanding the deleveraging risk, we think that the selldown is unwarranted, given the fundamentals of our banking sector and economy,' it said.

Affin Research said the Malaysian banking sector remains sound, as reflected by sufficient capital adequacy ratios and healthy loan growth even through 2008-2009, aided by accommodative monetary policy.

'In terms of asset quality, there was no significant build-up of non-performing loans during the last financial crisis in 2008 despite the financial market turbulence. No banks in Malaysia suffered from serious collateral damage as there was little portfolio exposure to western derivative instruments or the developed economies,' it said.

The research house said it maintained its Overweight rating on the banking sector. Earnings in 2011 would continue to be driven by sustainable net-interest-income growth, non-interest income as well as lower credit costs.

'We recommend a focus on banks with a reasonable level of LD ratio (below 90%), steady and improving ROE generation and exposure to the higher growth regional markets (through tie-ups and subsidiaries). On our stock pick, we like CIMB, Public Bank, Maybank, RHBCap, Hong Leong Bank and AFG,' it added.

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