Latest news with #HLIB
New Straits Times
14 hours ago
- Business
- New Straits Times
HLIB: Malaysia's investment appeal intact despite tariff jitters, tax gap
KUALA LUMPUR: Global markets have stayed largely composed despite the threat of renewed US tariffs – a resilience that could embolden former US President Donald Trump to intensify his protectionist push next month, said Hong Leong Investment Bank Bhd (HLIB). While Malaysia currently faces a 25 per cent US tariff – above Indonesia's 19 per cent and Vietnam's 20 per cent – HLIB believes the gap is relatively minor and unlikely to trigger a major shift in foreign investment flows, describing the differential as "modest". "Even if tariffs remain elevated, policy tools like tax incentives can cushion the impact, in our view. We are not overly alarmed. "The differential of five to six per cent is modest and, in our opinion, unlikely to be material enough to meaningfully divert foreign investment," HLIB said in its latest market strategy note today. Additionally, HLIB also noted that Malaysia's higher corporate tax rate of 24 per cent, compared to Indonesia's 22 per cent and Vietnam's 20 per cent, has not historically hindered its attractiveness to foreign investors. "This is thanks to our mature and integrated manufacturing ecosystem, supported by a well-developed local supply chain. "Thus, we believe these structural strengths will continue to make Malaysia an attractive destination under the global supply chain diversification," it added. While HLIB expects the third quarter (Q3) to remain noisy due to macroeconomic and policy uncertainties, it projects calmer conditions in Q4. "The FBM KLCI target is retained at 1,640, premised on a 14.5 times price-to-earnings ratio, which is below its five- to 10-year averages. "We continue to envision the second half of 2025 to be a quarter of contrasts, where Q3 is characterised to be turbulent before entering into calmer skies in Q4. Thus, we see any sharp drop as an opportunity to buy on weakness, especially high beta stocks. "Top picks include CIMB Group Holdings Bhd, Sunway Bhd, Gamuda Bhd, 99 Speed Mart Retail Holdings Bhd, AMMB Holdings Bhd, IOI Properties Group Bhd, Dialog Group Bhd, and SmartRent Inc," it said. On domestic strategy, HLIB expects the upcoming 13th Malaysia Plan to align with ongoing Madani initiatives while allocating RM440 billion in development expenditure. "That said, the development expenditure will be anchored by fiscal prudence to ensure adherence to the government's fiscal deficit target of 3.5 per cent gross domestic product between 2025 and 2027. "Overall, we anticipate the 13MP to adopt a globalist approach, particularly given the significant overlap with Trump's presidency through 2028. "Also, we expect a continuation of the whole-of-nation Madani ethos, with the 13MP reinforcing flagship policy anchors like the National Energy Transition Roadmap, New Industrial Master Plan 2030, and National Semiconductor Strategy," the firm added.
New Straits Times
14 hours ago
- Business
- New Straits Times
HLIB sees profit boost ahead for Affin Bank
KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) estimates Affin Bank Bhd will see a notable improvement in profitability, driven by a strategic shift in its funding mix, a strong loan pipeline, and enhanced operational efficiencies. In a note today, the firm maintained its "Buy" call on the bank with an unchanged target price of RM3.00, implying a 0.60 times financial year 2026 (FY26) price-to-book value. "While sector-wide asset yields have gradually declined, Affin's primary challenge and significant opportunity lie in managing its cost of deposits. "We believe multiple levers are now in place to support net interest margin (NIM), including the statutory reserve requirement by Bank Negara Malaysia, partially offering the impact of the 25 basis points Overnight Policy Rate cut. "The bank also slashed its fixed deposit promotional rates by 35 to 50 basis points, more than its peers. This steeper reduction suggests a deliberate strategy, likely driven by the anticipation of cheaper funding sources," the firm said. HLIB also noted that the inflow of low-cost current account and savings account (CASA) funds, especially from Sarawak government-linked companies and upcoming civil servant payroll accounts, has positioned Affin to reduce its reliance on expensive funding. "Affin has been actively refreshing its digital offerings, including its recently launched AffinAlwaysX app for retail and revamped AFFINMax mobile app for businesses, both of which should enhance product and CASA stickiness," it added. HLIB said that despite peers' cautious stance, the market may be underpricing the bank's return on equity inflection point. "In the second quarter of 2025, Affin's net interest income is expected to hold steady, supported by a strong loan base and a stable sequential NIM. "The bank's loan pipeline remains strong at RM9 billion, while proactive cost-of-funds optimisation efforts are likely to offset asset yield pressure," it said. Meanwhile, with the 10-year Malaysian Government Securities yields currently still trading below 3.5 per cent, HLIB sees there is significant room for Affin to capitalise on favourable trades. "Given stable asset quality, we expect the improved recovery momentum should keep net credit cost in the single digits for FY25. "Overall, HLIB sees upside potential in Affin's risk-reward profile, particularly given the strategic backing from the Sarawak government. "Further upside largely hinges on tangible benefits emerging from the Sarawak government's strategic involvement," it added.
Focus Malaysia
a day ago
- Business
- Focus Malaysia
Glove sector plunges down to 59% amid weak demand, tariff fears
Glove makers under Hong Leong Investment Bank (HLIB)'s coverage have declined significantly in the first half of 2025 (1H2025), with share prices down between -47% to -59%. The sector was first weighed down by growing investor risk aversion towards export-oriented sectors in early-2025 in view of the potential unfavourable reciprocal tariffs to be imposed on Malaysia imports by US President Trump post his inauguration. Sentiment was further dampened by earnings disappointments from Hartalega and Kossan in Feb 2025, which missed both our and consensus estimates. This was accompanied by a weak forward guidance from Hartalega, which flagged the possibility of returning to losses in upcoming quarters and raised concerns over Chinese peers' expansion into Southeast Asia (SEA). 'Based on our checks, sales orders for generic medical examination rubber gloves remain subdued since Feb 2025, with the US replenishment cycle guidance continuing to be pushed back,' said HLIB. According to the glove makers, the softness was primarily attributed to US distributors still sitting on the front-loaded inventories, while ex-US markets are facing fierce competition from Chinese players. We believe that the muted US demand faced by Malaysian manufacturers may also be linked to transhipment activities by Chinese peers, who rerouted shipments through Thailand, Indonesia, and Vietnam, before exporting to the US. This is evidenced by the rising market share and imported customs values from these countries, even as total US customs values for imported medical and surgical rubber gloves during March-April 2025 remained comparable to the front-loading period in October-November 2024. For pricing, glove makers have indicated the average selling point (ASP) for generic medical examination rubber gloves will remain in a downtrend due to lower raw material prices and ongoing fierce competition domestically and regionally. Based on our channel checks, there will be about 5-8 bil pcs/annum coming online in Vietnam and c.5bn pcs/annum in Indonesia by end-2025. In addition, we estimated that Intco will add 10 bil pcs/annum from China itself in 2025. On a positive note, there remains potential for a gradual demand shift among US buyers from vinyl gloves to nitrile rubber gloves should the ongoing 90-day tariff negotiations between the US and China end unfavourably. This substitution effect, estimated at an additional 28-38 bil pcs/annum, could help absorb the incoming supply from Intco's expanded capacity, thereby supporting the path toward restoring supply-demand equilibrium by 2026, based on our view. —July 21, 2025 Main image: Reuters
Focus Malaysia
a day ago
- Business
- Focus Malaysia
HLIB maintains 2025 GDP growth forecast at 4.0% amid global uncertainty
MALAYSIA released advance estimate for quarter two 2025 (2Q25) on 18th Jul, based primarily on two months of published production data (Apr and May) and estimates for Jun, to estimate the gross domestic product (GDP) by production sector. 'On a year-on-year (YoY) basis, GDP growth ticked up to +4.5% YoY, while on a quarter-on-quarter (QoQ) basis, Malaysia's economy rebounded by +1.0%,' said Hong Leong Investment Bank (HLIB). Actual 1Q25 GDP print will be released on 15th Aug 2025. Services sector: +5.3% YoY. Growth was mainly driven by sustained growth across all sectors, particularly the wholesale & retail trade, transportation & storage, and business services sub-sectors. Manufacturing sector: +3.8% YoY. Supported by continued expansion in production of electrical, electronic & optical products, vegetable and animal oils & fats and food processing products, as well as non-metallic mineral products, basic metal & fabricated metal products. Construction sector: +11.0 YoY, anchored by sustained expansion across all segments, particularly in non-residential buildings and specialised construction activities. Agriculture sector: +2.0% YoY. Growth was fuelled by increased production in palm oil, other agriculture and livestock sub-sectors, offsetting the contraction in the rubber sub-sector. Mining and quarrying sector: -7.4% YoY. The steeper decline was primarily attributed to decline in production of natural gas, as well as crude oil & condensates due to plan closure for maintenance. Mining and quarrying sector: -7.4% YoY. The steeper decline was primarily attributed to decline in production of natural gas, as well as crude oil & condensates due to plan closure for maintenance. Domestic demand is expected to remain the key growth driver, underpinned by a healthy labour market and supportive government policy measures. The continuous improvement in tourism activity and healthy investment pipelines will provide further support to overall momentum. 'Nevertheless, Malaysia's growth prospect faces mounting pressures from an uncertain global environment, as the ongoing US-MY trade negotiations adds uncertainty to the overall trade outlook,' said HLIB. Downside risks includes a potential deterioration in Malaysia's export competitiveness relative to regional peers due to disproportionate tariff exposure, as well as weaker global consumer sentiment. In light of these headwinds, we maintain our 2025 GDP growth forecast at 4.0%. With a stronger-than-expected 2Q25 GDP, we continue to expect Bank Negara Malaysia to keep the overnight policy rate unchanged at 2.75% for the rest of 2025. —July 1, 2025 Main image: Edgeprop
New Straits Times
2 days ago
- Business
- New Straits Times
Kossan stands out as HLIB's sole 'Buy' in glove sector
KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has maintained its "Neutral" stance on the glove sector for the second half of 2025 (2H25), with Kossan Rubber Industries Bhd as its sole "Buy"-rated stock. The firm set a target price of RM2.30 for Kossan, and issued a "Hold" rating on Hartalega Holdings Bhd at RM1.48, and a "Sell" call on Top Glove Corp Bhd with a target price of 60 sen. "Kossan distinguishes itself through its differentiated strategies and robust financial footing, against a challenging industry backdrop," HLIB said in a research note today. HLIB said concerns over a supply-demand imbalance in the glove sector remain elevated, driven mainly by the aggressive expansion of Chinese, Vietnamese and Indonesian peers. "Chinese Intco Medical's cost advantages, driven by automation and favourable input economics, continue to underpin its relatively aggressive pricing strategy. "Transhipment flows from China via Thailand, Vietnam, and Indonesia are also displacing Malaysian exports and delaying volume recovery in the US market," it said. HLIB noted that share prices for glove makers fell between 47 per cent and 59 per cent in 1H25, weighed by earnings misses and weak investor sentiment. "Hartalega and Kossan missed both quarterly and consensus expectations in February, while Top Glove also reported below-par results in March. "Investor confidence was further undermined by another round of earnings misses from Hartalega, coupled with a more bearish industry outlook guidance. "We believe that the muted US demand faced by Malaysian manufacturers may also be linked to transhipment activities by Chinese peers," the firm said. Meanwhile, HLIB expects average selling prices (ASPs) to stay subdued due to raw material prices and intense regional competition, as ASPs peaked in December 2024. On global supply, HLIB projects an additional five to eight billion pieces per annum in capacity from Vietnam and 0.5 billion from Indonesia by the end of 2025. "We estimated that Intco will add approximately 10 billion pieces per annum of glove production capacity from its operations in China alone in 2025," it added.
