- The call on the sector remains a macro call, given that banks are often viewed as proxies to the economy. We think the sector would be a beneficiary from our expectations of GDP accelerating to 5.4% in 2013 from 5% this year.
- Malaysian banks earnings are still very much domestic-centric, where domestic demand is resilient, capital market activities have been surprisingly robust and asset quality largely benign. This will help earnings stay resilient. In addition, consensus earnings estimates have been creeping up this year after steep cuts made last year. We think the upgrade cycle still has legs.
- We project 2012-13F net dividend yields of 3.8-4.2% for the sector, which compares well with the FBM KLCI. This, we think, would help provide support to share prices when markets are volatile.
- Finally, we think the sector is trading at attractive valuations (both on PER and P/BV metrices) relative to the FBM KLCI and other heavyweight sectors. For funds benchmarked to domestic indices, we think the confluence of factors such as inexpensive valuations, heavyweight sector and ample liquidity in the system means that the sector should not be ignored.
- Overweight stance maintained with Maybank, Public Bank and CIMB as our top picks.
Thursday, October 11, 2012
Banking - Heavyweights To Deliver (Overweight)