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The Star
2 days ago
- Business
- The Star
FBM KLCI holds steady as selective buying supports market
KUALA LUMPUR: The FBM KLCI held firm through the morning session, supported by selective buying interest amid cautious sentiment and ongoing US-China trade uncertainty. The FBM KLCI gained traction through the morning session, rising 2.08 points, or 0.14%, to 1,521.49 at the midday break after touching an intra-morning high of 1,522.30. Winners and losers were closely balanced, with 384 gainers against 382 losers and 466 that were flat. Volume was 1.8 billion shares, valued at RM883.3mil. Hong Leong Investment Bank Research said the FBM KLCI may continue to trend sideways with an upward bias, following a positive phone call between Trump and Xi last week and the start of the second round of US-China trade talks, which are set to continue for a second day in London today. That said, sentiment remains cautious amid foreign outflows, uncertainty over the US-Malaysia tariff deal, and June's typically weak performance. Global trade concerns, economic headwinds, and potential local subsidy cuts in 2H25 also weigh on the outlook. Meanwhile, Malacca Securities expects the local bourse to trade softer, with investors focusing on fundamentally strong companies for buying opportunities. 'We favour Inta Bina, supported by its strong ties to major developers like Gamuda. Meanwhile, as the market factors a rate-cut environment, REITs could attract interest due to their healthy yields of over ~4%. 'We believe Sunway REIT presents a decent opportunity, in view of the recent breakout and its uptrend intact share price movements,' it said. Malaysian Pacific Industries led the gainers, rising 32 sen to RM21.22, followed by Nestle, which climbed 26 sen to RM76. Heineken added 18 sen to RM26.98, while PPB Group gained 10 sen to RM11.08. On the downside, Ayer slid 40 sen to RM7.20, Hong Leong Bank dropped 18 sen to RM19.52, Southern Acids lost 17 sen to RM2.93, and SHL Consolidated eased nine sen to RM2.15. Newly listed Paradigm-REIT edged up one sen, or 1%, to RM1.01 with 26.51 million shares traded, making it one of the most active counters on Bursa Malaysia.
The Star
2 days ago
- Business
- The Star
Fundamentals remain strong for banks this year
PETALING JAYA: Analysts closely monitor the financial performance of banks because they serve as a vital barometer of the broader economy's health. However, after the recently concluded reporting season for results from the first quarter of this year (1Q25), differing views have emerged. Hong Leong Investment Bank Research (HLIB Research) has an 'overweight' call on the sector, viewing the Kuala Lumpur Finance Index's 7% decline year-to-date as a strategic opportunity to build positions ahead of an anticipated market recovery in the second half of this year. 'Our conviction is underpinned by a confluence of compelling fundamentals. Chief among them is an attractive valuation at 1.04 times forward price-to-book. The other factors are robust 5.4% dividend yield offering downside support, and defensive earnings resilience backed by substantial pre-emptive provisions,' said HLIB Research in a report. It expects sector net interest margins (NIMs) in 2Q25 to hold up reasonably well sequentially. HLIB Research said it sees three key forces shaping the landscape: fresh liquidity from the recent cut in the Statutory Reserve Requirement for banks: reduced pressure from deposit competition and a sector-wide shift toward more disciplined loan growth and funding strategies. 'This proactive stance is already visible, with banks cutting promotional fixed deposit rates between five and 15 basis points in May, ahead of a potential overnight policy rate cut, though the full margin benefit may only materialise in the second half of this year,' it added. Asset quality is expected to remain stable, supported by resilient domestic economic conditions and minimal US trade exposure, which is below 1% to 4% of total loans. 'While acknowledging risks from the secondary impacts of trade uncertainty, we believe any potential weakness will be well-contained. 'The sector is significantly more resilient than in previous downturns, primarily due to the formidable provision buffers accumulated over the past five years. This provides a robust defence, capable of absorbing any stress and cushioning the gross impaired loan ratio, which currently stands near historical lows,' said HLIB Research. On the other hand, Maybank Investment Bank Research (Maybank IB Research) said the banking sector 'saw misses when they typically have an unblemished track record', after the results season. 'The first quarter was not a pleasant one, being tilted to a negative bias. There were more misses than wins. There were no sectors that clearly outperformed and banks were mostly below expectations,' said the research house. With expectations of a weaker outlook, Maybank IB Research has downgraded the banking sector to 'neutral' from 'positive' as it anticipates modest earnings growth of 1% and 5% for this year and next, respectively, from the 5.7% and 5.5% previously forecast. Touching on some key statistics, the research house said cumulative loan growth had moderated to 4.4% year-on-year (y-o-y) as of end-March 2025 from 5.5% as of end-December 2024. NIMs slipped by an average of two basis points quarter-on-quarter (q-o-q). With lower non-interest income and negative Jaws ratio that measures the difference between the growth rate of a bank's income and expenses, the research house noted that the sector's core operating profit rose merely 1% y-o-y. Amid lower credit cost, it said core pre-tax and net profit rose at a slightly faster pace of 4% from a year ago. 'However, in light of slower economic growth ahead, we have trimmed our bank earnings forecast by 5% and 4% for 2025 and 2026, respectively, and now forecast 2025 and 2026 net profit growth of 1.1% and 5%, respectively.'
