Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on September 28, 2020 - October 4, 2020

THE market capitalisation of Malayan Banking Bhd has shrunk to below RM80 billion, as the selldown of banking stocks continued, further reducing the gap between the most valuable company on the local stock exchange and the next in line, Top Glove Corp Bhd. Maybank declined 0.14%, or one sen, to RM7.08 last Friday, valuing it at RM79.59 billion. A total of 4.51 million shares were transacted. On a year-to-date basis, the counter has declined 18.1% (see table).

Top Glove, on the other hand, gained 2.92% or 25 sen to RM8.80, valuing it at some RM71.55 billion. A total of 76.30 million shares were traded. YTD, the stock is up 461.70%.

This has reduced the gap between the companies to RM8.04 billion, from RM10.18 billion last Thursday and RM15.39 billion on Wednesday. On Dec 31, 2019, the gap between the two was RM85.09 billion — Top Glove then had a market cap of RM12.03 billion compared with Maybank’s RM97.13 billion.

Maybank is now down 5.47% from the 12-month consensus target price (TP) of RM7.49 it garnered on Bloomberg. The stock has four “buy” calls, 12 “holds” and five “sells”.

Most of the other banks on the local bourse also registered minor gains at most last Friday. Among the decliners were AMMB Holdings Bhd (down 0.34% or a sen to RM2.94), Public Bank Bhd (down 0.52% or eight sen to RM15.44) and Affin Bank Bhd (down 1.41% or two sen to RM1.40).

Among those that registered minor gains were CIMB Group Holdings Bhd (up by 0.33% or one sen to RM3.06), RHB Bank Bhd (up by 0.22% or one sen to RM4.60) and Alliance Bank Malaysia Bhd (up by 0.46% or one sen to RM2.18).

The Financial Services Index closed 0.06%, or 7.82 points, lower at 12,327.62 points. In contrast, the FBM KLCI closed 8.34 points higher at 1,509.14, as renewed buying interest in glove counters helped lift the benchmark index.

Fortress Capital Asset Management (M) Sdn Bhd investment adviser and director Geoffrey Ng told The Edge that there was no catalyst for investors to accumulate banking stocks. Recent political developments in the country further weighed on the already weak sentiment, he said.

The overall sentiment on banks is reflective of the expectation of lower corporate earnings. The current environment is marked by low interest rates, slower loan growth and higher non-performing loans (NPLs). However, this is not just restricted to Malaysia as listed banks in Singapore and Hong Kong are also experiencing similarly weak sentiment, Ng added.

TA Investment Management chief investment officer Choo Swee Kee also attributed the fall in Maybank and other banking stocks to poor sentiment, as investors are worried about the impact of the loan moratorium on bank earnings.

Is now a good time to buy in?

While Maybank’s share price now appears to represent “good value”, Choo does not think the stock has hit bottom yet.

As for dividend payouts, while Maybank withheld its payout for the second quarter ended June 30, 2020 (2QFY2020), surprising and disappointing many, president and CEO Datuk Abdul Farid Alias has said the banking group is committed to keeping its yearly dividend policy, which is a payout ratio of between 40% and 60% of its net profit.

A fund manager, who declined to be named, said he was still attracted to Maybank’s dividend yield and the potential price recovery when the economy returns to normal after the pandemic is over.

“It suits a long-term dividend portfolio,” he said. Based on Bloomberg data, Maybank has an indicative dividend yield of 5.5%.

EPF buys glove shares

Meanwhile, the country’s largest retirement fund, the Employees Provident Fund (EPF) has been buying up glove stocks.

On Sept 18, it re-emerged as a substantial shareholder of Top Glove with a 5.05% stake after acquiring 13.7 million shares in the world’s largest rubber glove maker.

Subsequently, it bought more shares last Monday to bump up its shareholding to 5.1% or 414.999 million shares.

EPF made a comeback as a substantial shareholder of Kossan Rubber Industries Bhd in June, and has been mopping up shares in this rubber glove company too. Within a four-month period, it has increased its shareholding to 8.09%, which means a net acquisition of a 3.08% stake or 39.38 million shares.

 

This story first appeared in The Edge CEO Morning Brief on Sept 25, and has been updated

 

 

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