Banks top gainers on Bursa

Written by Yong Yen Nie
Thursday, 22 October 2009 11:41

KUALA LUMPUR: Banking stocks, led by CIMB Group Holdings Bhd and HONG LEONG BANK BHD [] (HLBB), have emerged as top gainers on the FTSE Bursa Malaysia KUALA LUMPUR COMPOSITE INDEX [] (FBM KLCI) since Sept 30.

Analysts said the rise in the prices of banking shares was an indication of the market’s confidence in the performance of banks. It could also point to the absence of near-term downside surprises.

HLBB was ranked first among the top 10 gainers on the FBM KLCI after advancing 14.16% since Sept 30, while CIMB ranked second with a gain of 13.7%, according to Bloom-berg data.

Six of the top 10 gainers on the benchmark index were financial institutions. AMMB HOLDINGS BHD [] came in fourth with a gain of 11.03%, RHB CAPITAL BHD [] sixth (7.1%), PUBLIC BANK BHD [] (PBB) eighth (4.9%) and MALAYAN BANKING BHD [] ninth (3.76%).

The Kuala Lumpur Financial Index has outperformed the FBM KLCI by 2.9 percentage points since Sept 30. As of yesterday, it had risen 7.7% to 10,712 points compared with a 4.8% gain to 1,260.06 points for the FBM KLCI.

Analysts said banking stocks had been “running” since August, following improved results in the second quarter of calendar year 2009, which acted as catalysts for more earnings upgrades in the banking sector.

Maybank Investment Bank Research banking analyst Wong Chew Hann said most banking stocks might have soared mainly due to market confidence that banks would not be hit by any significant charges over the near term.

“Investors are also keen on CIMB, as they believe the banking group will clinch more lucrative investment banking deals in the future, as the global economic and market outlook improves,” she told The Edge Financial Daily yesterday.

Commenting on HLBB’s performance, a banking analyst with a foreign research house said the counter might be playing catch-up, given that the valuation of the bank was one of the lowest among local financial institutions.

Given that the reporting season for banks was near, investing interest in financial institutions might have heightened, especially as the lenders were expected to show positive results in the third quarter of calendar year 2009.

Together with positive news of the economy recovering, financial institutions, being proxies of the economy, were also bound to be beneficiaries, the analyst said.

PBB had already given investors a “feel” of what to expect from the other banks after its net profit in the third quarter of the financial year ending Dec 31, 2009 (3QFY09) rose 3.68% year-on-year to RM639.05 million on the back of strong loans and deposit growth and stable asset quality.

PBB’s net profit had come in slightly above analysts’ expectations of a 2%-3% growth. Revenue, however, fell 12.5% to RM2.44 billion in 3QFY09 from a year earlier, while earnings per share grew to 18.52 sen from 18.37 sen.

Nevertheless, Macquarie Research believed that the group’s ability to outperform its peers in loan growth, as well as maintain its pristine asset quality would remain its key strengths.

In a research report, Nomura Securities Malaysia Sdn Bhd said it was bullish on banks, with positive catalysts of better loan growth and falling bad debt provisions going forward.

It said CIMB was the preferred banking pick, given that its return on equity, as guided by management, was on positive trajectory to reach 18% over the next two to three years.

Its corporate and investment banking business was also expected to benefit from the government’s move to raise the profile of domestic capital markets with foreign investors, Nomura said.

Meanwhile, in the mid- to small-cap segment, investors were largely positive on AMMB, underpinned by vastly improved asset quality and undemanding valuations at 1.5 times price-to-book.

Several banking counters had closed at their 52-week highs in the past two days.

HLBB and PBB closed at a 52-week high yesterday, with HLBB rising 12 sen to RM7.50 with 2.51 million shares done and PBB adding four sen to RM10.70 on a turnover of 2.21 million shares.

CIMB, AMMB and Maybank had achieved the same feat on Tuesday. CIMB closed unchanged yesterday at RM12.62 while AMMB slipped two sen to RM4.73 from its 52-week high of RM4.76 with 11.58 million shares done.

Maybank closed at RM6.98 on Tuesday and gave up eight sen yesterday with 5.6 million shares changing hands.


This article appeared in The Edge Financial Daily, October 22, 2009.