We are keeping our Overweight stance on the
sector. Despite the further rise in household indebtedness, BNM appears
comfortable with bank lending to households and is unlikely to introduce
further tightening measures for now, in our view. The new Financial Services
Act will further expand BNM’s reach to entities that it does not currently
regulate and is potentially a game changer ahead, we believe.
Household indebtedness rose further to 80.5% of
GDP in 2012, as
compared to 75.8% in 2011. Nevertheless, BNM appeared comfortable with bank
lending to households, as the bulk of the loans were for the purchase of
assets. However, the non-bank financial institutions (NBFI) continued to enjoy
rapid credit expansion, driven by the growth in personal loans. We believe the
Financial Services Act could be a game changer ahead for the NBFIs that are
currently outside the purview of BNM. The new legislation will come into effect
mid-2013 and empowers BNM to impose regulations on entities that it currently
does not regulate.
Residential property prices continue to rise
but further measures unlikely for now. BNM believes the upward trend in residential
property prices is mainly a reflection of supply-demand dynamics, rather than
financial factors. Other contributing factors include demographic changes and
rate of urbanisation. Measures to address the rising house prices include the
Government’s efforts to increase the supply of affordable houses while
pre-emptive measures introduced in 2010 appear to have helped moderate
investment activities. For now, we do not expect BNM to introduce further
measures on this front.
Maintain Overweight stance on sector. Our Overweight stance is
unchanged. Our top picks for the sector are Maybank and Public Bank, while we
advocate a “buy on weakness” strategy for CIMB, pending the general election.
Source: RHB
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