Banking Sector : Higher deposit growth with stronger CASA momentum NEUTRAL

SECTOR FOCUS OF THE DAY

Banking Sector : Higher deposit growth with stronger CASA momentum                NEUTRAL

Industry loans registered a higher growth of 5.6% YoY with business loans continuing to gain traction.  Industry loan growth continued to rise to 5.6% YoY in January 2017 from 5.3% YoY in the previous month. The expansion was driven by stronger momentum for business loans. Working capital loans continued its rising trend while growth in household loans moderated slightly in January 2017. For household loans, growth in mortgage loans remained stable compared to the previous month while loans for purchase of vehicles remained slow, in line with the drop in new car sales. January 2017 saw higher loan disbursements while loan repayments contracted by a marginal 0.7% YoY.

Deposit growth improved in January 2017 with a stronger CASA growth. Industry deposit growth improved to 2.6% YoY in January 2017, higher than the 1.5% YoY recorded in December 2016. Business enterprises’ deposits continue to contract but at a lower rate of decline at -0.3% YoY, while individual deposits expanded with a higher growth rate of 6.0% YoY. Industry CASA growth rose to 5.8% YoY. This led to a higher CASA ratio of 26.7%. Liquidity eased slightly for the sector with a lower LD ratio of 89.4%.Base rate was stable at 3.62% in January 2017. Interest spread (between the average lending rate and 3-month FD rate) rose by 5bps MoM to 1.62%, due to higher ALR.

Maintain NEUTRAL on the sector. CIMB (fair value: RM5.70/share) and RHB Bank (fair value: RM6.00/share) remained as our BUY calls. We continue to like these two stocks due to compelling valuations, trading below 1.0x P/BV, decent ROEs and potentially further improvements to CI ratios from cost initiatives.

Others :

Telecommunication Sector : Sector consolidation looms amid intense competition                           NEUTRAL

STOCKS ON THE  RADAR

My E.G. Services, OKA Corporation,Iskandar Waterfront City,Global Oriental

QUICK TAKE

Plantation Sector : Key takeaways from IndoAgri’s conference call           NEUTRAL

ECONOMIC HIGHLIGHTS

US : Probability for a rate hike in March rises

Malaysia : Bank Negara likely to stand pat on OPR with improving PMI

Indonesia : Upwards inflationary pressure to remain

Thailand : Inflationary pressure creeping in

NEWS HIGHLIGHTS

Oil & Gas Sector : Petrol One inks support services deal with Dalian

Consumer Sector : La Kaffa seeks injunction to stop Loob from continuing under rebranded image

IT Sector : HeiTech Padu signs RM41.87mil agreement with PNB