RHB Research has maintained an “Overweight” call for the Banking sector and has revised its pecking order for its revised picks with HL Bank (domestic focus attributes with solid fundamentals), Maybank (ESG leadership and attractive dividends), and AMMB (earnings recovery, undemanding valuation), while advocating investors to accumulate others on weakness.
The research house said that the combination of risks and fragilities brought about by the geopolitical upheaval in Ukraine will keep markets volatile and risk-off sentiment elevated.
Still, RHB says that Malaysia, with its relatively defensive attributes, should see some short-term outperformance. For banks, it believes the domestic reopening and improving asset quality themes will remain in play.
It said that of the eight banks under its coverage (MY Banks), five posted results that were above our expectations. AMMB, Alliance Bank Malaysia (ABMB), and Affin delivered a strong QoQ rise in net profit. The improvement at ABMB and Affin was driven mainly by lower impairment charges while AMMB’s bottom-line was boosted by recognition of an MYR234.5m tax credit. BIMB was the only miss.
It said that its base case assumes that the Ukraine conflict will be contained within Ukrainian borders but nevertheless, global inflationary pressures will be exacerbated on the back of elevated commodity prices, and at the risk of slowing global growth.
On this end, RHB economist expects three US Federal Fund Rate (FFR) hikes by 25 bps in 2022, and closer to home, a 25bps overnight policy rate (OPR) hike in 2H22.