SELLING PRESSURE: Most analysts maintain investment calls as banks’ stocks fall despite positive news
NEWS that Malayan Banking Bhd and CIMB Group would not be affected by new shareholding rules being proposed in Indonesia is “positive” for both banks, analysts said, but it did little to boost their stocks yesterday.
The stocks succumbed to selling pressure in the broader market amid fragile investor sentiment throughout the Asian region.
“I think, worries about Europe’s deepening crisis outweighed the good news for the two banks,” said an analyst from a foreign research firm.
It was reported late Thursday that Indonesia plans to limit single ownership in its banks to 40 per cent, but only for new investments.
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This means that Maybank and CIMB get to keep their controlling stakes in their respectivebanks in that country.
The news led Alliance Research to raise its call on CIMB to a “buy” from “neutral” as it removed the 10 per cent discount it had earlier placed on its valuation due to the shareholding
uncertainties in that country.
The research house also upped its target price for the stock by 50 sen to RM8.47.
The news is “highly positive” for CIMB given that its 96.9 per cent-owned CIMB Niaga contributes significantly to the group’s bottomline and is its key earnings driver, Alliance Research’s banking analyst Cheah King Yoong said.
CIMB Niaga accounted for about 32 per cent of CIMB’s pre-tax profit in the first quarter.
On the other hand, the new cap could deter local lenders RHB Capital Bhd and Affin Holdings Bhd from venturing into Indonesia.
Maybank shed 0.7 per cent to RM8.69 while CIMB eased 1.3 per cent to RM7.40 as the FBM KLCI fell along with most markets in the region.
The key index eased 0.5 per cent to 1,573.59 points. Affin was unchanged at RM3.07 while RHB Capital was down by 0.4 per cent to
RM7.40.
Cheah said the new shareholding cap is likely to deter foreign financial institutions from acquiring Indonesian banks, hence, from a longer term perspective, it may decelerate the anticipated competition in the Indonesia banking sector.
"This development is therefore expected to augur well for the foreign-owned incumbents such as CIMB Niaga. The announcement should also address the uncertainties surrounding the issue permanently, rather than Bank Indonesia leaving the issue hanging in the air by suspending its decision indefinitely back in December last year, in our opinion," Cheah, who is also Alliance's vice-president of equity research, said.
Other research houses did not change their calls on Maybank and CIMB.
"I believe the market had largely priced in the worst-case scenario for the two banks, believing that even if they had been affected by the new regulation, they would have been given ample time to sell down their stakes," said the earlier analyst.
Maybank owns 97 per cent of Bank Internasional Indonesia (BII), which accounts for under 5 per cent of the group's earnings.
Alliance Research and Hong Leong Investment Bank Research kept their "overweight" stance on the local banking sector, while RHB Research maintained a "neutral" after latest banking data showed that loans growth decelerated slightly to 12.1 per cent year-on-year in April, from 12.2 per cent in March.
Data showed that there was higher growth in the business segment in April while the household segment was marginally lower
From Business Times: Upbeat outlook on Maybank, CIMB
