Public Bank top gainer as Malaysia lenders surge on US rate hike

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KUALA LUMPUR (Dec 14): Malaysian banking shares rose today on expectation that Bank Negara Malaysia will raise interest rates following the US Federal Reserve's interest rate hike on Wednesday.

At 12:30pm today, Public Bank shares rose 52 sen to RM20.88 while Hong Leong Bank Bhd climbed 20 sen to RM16.78. Malayan Banking Bhd rose 20 sen to RM9.45 while CIMB Group Holdings Bhd gained seven sen to RM6.25.

Public Bank was Bursa Malaysia's top gainer while Hong Leong Bank was the ninth-largest advancer. Bursa Malaysia's finance index rose 264.42 points or 1.62% to 16,533.27 points. The FBM KLCI added 15.67 points to 1,753.33 points.

According to SJ Securities Sdn Bhd senior remisier Goh Kay Chong, technical charts are showing that funds are buying Malaysian banking shares following the US interest rate increase as they expect Bank Negara to follow the US's footsteps.

"That way, Public Bank and all other local banks will benefit from the higher interest rate," Goh told theedgemarkets.com.

Last month (November), Bank Negara said it decided to maintain the Overnight Policy Rate (OPR) at 3%. "At the current level of the OPR, the stance of monetary policy remains accommodative. Given the strength of the global and domestic macroeconomic conditions, the Monetary Policy Committee may consider reviewing the current degree of monetary accommodation. This is to ensure the sustainability of the growth prospects of the Malaysian economy," Bank Negara said.

Today, CIMB Investment Bank Bhd analyst Winson Ng said Bank Negara's expected interest rate hike in 2018 will be positive for banks' profit margins.

"We retain our 'neutral' call on Malaysia banks given the weak loan growth and the potential rise in loan loss provisioning upon adoption of MFRS (Malaysian Financial Reporting Standards) 9 in 2018F," Ng said.

The US interest decision has been closely watched. Reuters reported that the Federal Reserve raised interest rates on Wednesday but left its rate outlook for the coming years unchanged even as policymakers projected a short-term jump in US economic growth from the Trump administration's proposed tax cuts.

It was reported that the US central bank raised rates by a quarter of a percentage point to a range of 1.25% to 1.5%. It was the third rate hike this year. But the Fed's forecast of three additional rate increases in 2018 and 2019 was unchanged from its projections in September.