Hong Leong keeps Malaysia banks neutral, pegs AMMB as 2H top pick
Malaysia’s banking sector is expected to remain range-bound in the absence of immediate near-term catalysts, Hong Leong IB analyst Raymond Ng said in a note. Current valuations already reflect optimism over capital management, with the sector trading at 1.15 times forward book value, one standard deviation above its five-year average, Ng said.
Prospects for additional shareholder returns remain largely limited to AMMB, CIMB and Public Bank, Ng said. A potential expansion of the benchmark KLCI index to 50 constituents from 30 could create a temporary overhang, limiting the scope for a sector re-rating, he added. Financial stocks have consistently dominated the index, Ng noted.
Hong Leong IB maintains a neutral rating on the Malaysian banking sector and pegs AMMB as its second-half top pick, according to the note.
Separately, RHB economist Wong Xian Yong said in a note that he expects Bank Indonesia to keep its benchmark interest rate unchanged at the central bank’s August meeting, extending a policy pause after raising rates by a cumulative 100 basis points since May.
Wong continues to expect one additional 25-basis-point rate hike in the third quarter, primarily to support the rupiah and contain imported inflation rather than respond to broad-based domestic price pressures.
Indonesia’s headline inflation is expected to remain broadly stable through the second half of the year, Wong said. Food prices are likely to remain the main source of volatility as El Niño conditions strengthen, while sustained rupiah weakness could gradually feed into imported inflation.
Subdued domestic demand and well-anchored inflation expectations should help limit broader price pressures, Wong added.