SECTOR FOCUS OF THE DAY
Banking Sector: Interest rate hike a mild booster to earnings OVERWEIGHT
There continues to be expectations of a mild and gradual rate hike cycle in developed economies. Meanwhile, BNM's more hawkish tone has hinted a potential review of monetary accommodation, which may see a revision of 25-50bps in the OPR in 2018. This could normalise the benchmark interest rate back to 3.50%. We are projecting 1 to 2 rate hikes (25bps each) in 2018, which will be mildly positive on banks' earnings.
An interest rate hike will have a temporary positive impact on banks' net interest income (NII) as banks' loan rates will be repriced higher, adjusting to the hike in the OPR before deposit rates catch up. Maintain OVERWEIGHT on the sector with an expected improvement in the sector's earnings in 2018 from 2017. This will be underpinned by a higher non-interest income from stronger capital market activities as well as an improvement in net interest income from a modest loan growth of 5.0% and marginally higher NIM. Our stock picks remain RHB Bank (fair value: RM6.00/share), Public Bank (fair value: RM22.20/share), CIMB (fair value: RM6.60) and ABMB (fair value: RM4.40/share).
Others :
Yinson Holdings: THHE’s financial crisis delays Layang FPSO charter BUY
QUICK TAKE
CIMB Group: Divesting stakes in CIMB-Principal Asset Management BUY
STOCKS ON RADAR
Mynews Holdings, Poly Glass Fibre, Zhulian Corp., Malayan Flour Mills
ECONOMIC HIGHLIGHT
Malaysia: Economic momentum stays strong
NEWS HIGHLIGHTS
Ta Ann: Buys almost a third of shares in Sarawak Plantation
Uzma: Bags another umbrella contract from Petronas Carigali
Property Sector: M101 Skywheel records over RM530m sales in 2017
KESM: Aims to keep the momentum going
DISCLAIMER:
The information and opinions in this report were prepared by AmInvestment Bank 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 AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd 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 judgment as of this date and are subject to change without notice.
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