AmWatch - Banking Sector : Foreign holdings in MGS continue to rise in March NEUTRAL, 2 May 2014

SECTOR FOCUS OF THE DAY

Banking Sector : Foreign holdings in MGS continue to rise in March          NEUTRAL

Foreign holdings of MGS continued to rise by RM1.4bil or 1.0% MoM to RM140.8bil in March 2014. This marks the fifth consecutive month of MoM increase since November 2013’s RM136bil level. . In terms of percentage of total outstanding MGS, foreign holdings level declined to 44.1% in March 2014, from 44.7% in February 2014. The decline in foreign shareholding was due mainly to a faster expansion in total outstanding MGS base.

Excluding foreign holdings in MGS, we estimate the industry’s gross loan-to-adjusted-deposit ratio to be at 89.5% in March 2014, a step back from the previous high of 90.0% in February 2014. The official industry’s loan-to-deposit ratio (LDR) is now at 85.1% in March 2014, easing back from 85.7% in February 2014. The March 2014’s official industry LDR data marked the third consecutive month of LDR remaining above 85%; it is still at the highest in more than ten years since January 2004’s 85.9%. 

Overall excess net deposit (total deposit less loans) improved to RM287bil in March 2014, from RM278bil in February 2014. Excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to have increased as well to RM157bil in March 2014, from RM145bil in February 2014.

MGS yields are relatively unchanged after reaching the recent peak in end-January 2014. The 10-year MGS yield was stable at 4.11% in end-March, which is relatively unchanged from end-February’s 4.11%, and still lower than the recent high of 4.3% at end-January 2014. The level remains elevated when compared to 4.09% in early August, when there were larger outflows due to foreign selling of MGS. Based on latest industry overall data, we are maintaining our stance of a likely less ample domestic liquidity situation ahead given the high foreign holdings of MGS. Maintain NEUTRAL on the sector.

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Others :

Banking Sector : Mild relief seen in March banking statistics         NEUTRAL

M’sia Marine & Heavy Engineering : Tapis R installed successfully              BUY

QUICK TAKES

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NEWS HIGHLIGHTS

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DISCLAIMER:

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.

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