Analysts maintain their OVERWEIGHT call for the banking sector, citing strong backing from domestic GDP target of 5.0% and system loans growth outpacing at 5.5%-6.0%.
With an in-house 2024 GDP target of 5.0%, analysts are convinced that loans growth would end on a higher note at 5.5%-6.0% as demand for both household and business loans remains strong.
The decision of Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) stable at 3.00% stood well. Previously, BNM stated that the central bank’s decisions to adjust the OPR will prioritise domestic performance in view of the inflation target of 2.0%-3.5%.
Meanwhile, regional central banks in developed and developing markets have progressively cut their respective rates, with Bank of Japan being an outlier, tightening policies to curb inflation risks.
Staying independent and shielded from the movement of global monetary policies has bode well for Malaysian banks, viewed as more stable picks for financial sector position seekers and attracting greater foreign participation, evident as there has been increases in foreign shareholding in the large cap names.
According to Kenanga Research, the top three picks in the banking sector in the final quarter of 2024 are Public Bank Berhad, Hong Leong Bank Berhad and RHB Bank Berhad.
With regards to Public Bank and Hong Leong Bank, the banks’ leading asset quality (Gross Impaired Loan < 1%) offer firm cushion against potential degradation in the industry. Meanwhile, RHB Bank offers leading dividend yields (c.7%) which could attract yield seekers in spite of modest loans growth targets (4%-5%), suggesting the possibility of greater upside should they be able to leverage of the wider economic growth.
Analysts have set the target prices for Public Bank at RM5.10, Hong Leong Bank (RM27.40), and RHB Bank (RM7.55).
As at 5pm on Tuesday, the counters’ closing prices were RM4.61, RM21.38, and RM6.22, respectively. (Stock updates from www.klsescreener.com)
