WHATS NEW

Datuk Nor Shamsiah Mohd Yunus Nor Shamsiah will be appointed as the new Bank Negara Malaysia (BNM) governor for a term of five years from 1 July 18 till 30 Jun 23. Datuk Nor Shamsiah was the Deputy Governor of Bank Negara Malaysia from 2010 till 2016. She recently served as Assistant Director of the Monetary and Capital Markets Division of the International Monetary Fund.

COMMENTS

• Smooth transition. The appointment of Datuk Nor Shamsiah Mohd Yunus does not come as a surprise given the numerous press speculations. Her appointment will ensure continuity in BNM’s prudent and pragmatic approach in policy formulation while instilling confidence in the stability of Malaysia’s financial system given the fact that Datuk Nor Shamsiah Mohd Yunus has been in BNM since 1987 and had played a key role in the preparation and the implementation of the Financial Sector Masterplan for the development of the Malaysian financial system from 2001 to 2010. Prior to leaving BNM, she was the deputy governor from 2010 to 2016 and was even considered as one of the potential candidates to replace Tan Sri Zeti Aziz as BNM governor back in 2016 given her level of experience and seniority within BNM.
• Maintain MARKET WEIGHT. Post-GE14 macro policy uncertainty could have a slight dampening effect on overall sector growth. As such, we believe that the sector is unlikely to chart the same degree of outperformance experience prior to GE14. However, earnings downside risk is partly mitigated by strong cost discipline (+2% to +3%) and manageable credit cost growth environment.
• Top picks: Public Bank (BUY/Target: RM25.20) and CIMB (BUY/Target: RM7.40, BUY). Given this scenario, we advocate a two-pronged strategy to navigate the potentially volatile near-term sector outlook with a focus on banking stocks with defensive qualities and those that have been excessively sold down due to sentiment rather than material change in fundamentals. In this respect, we like Public Bank (PBK MK/BUY/Target: RM25.20) for its defensive qualities and CIMB (CIMB MK/BUY/Target: RM7.40) as we believe that the selldown on its share price has been excessive with the group still expected to chart a double-digit earnings growth recovery in FY18 on the back of lower provisions.

Source: UOB Kay Hian Research - 25 Jun 2018