- Leading loan indicators remained muted in March. Loans applications continued to be soft with a larger contraction of -13.0% in March 2013, compared with -9.4% in February 2013. Loans approved also decreased by a larger rate of -10.3% in March, after a flat -1.2% in February 2013.

- Soft corporate segment, likely due to wait-and-see stance. There was a plunge in the corporate segment loans applied at -34.7% in March, compared with a marginal decline of -4.7% in February. For loans approved, the corporate loans approved slowed by a faster rate of -24.5% in March, vs. a flat -0.6% in February. We believe this was likely due to a wait-and-see mode adopted by corporate and business owners.

- Some revival in the residential mortgage and auto segments. The household segment registered some growth at 3.9% in March, following a -12.0% decline in February 2013, which was due to the holiday season. Loans approved for the household segment was stable at -1.7% in March, which is similar to the -1.4% seen in February. The main drag was in the non-residential mortgage segments. Otherwise, residential mortgage and auto loans showed healthy growth.

- Gross impaired loans improved, after two months of upticks. Gross impaired loans recorded a marginal improvement, with a drop by 0.4% MoM in March. This followed two consecutive months of MoM upticks. This affirms our belief that the upticks were related to a seasonally slower repayment trend in the beginning of the year. The only segment with a continuing uptick was the working capital impaired loans, which had risen 3.8% MoM in March and 1.1% in February. However, gross impaired loans ratio remained unchanged at 2.0% in March vs. 2.0% in February. We believe the uptick in working capital looked contained given that the rise was still marginal, while overall loan loss cover remained high at 99.2% in March (February 98.2%). Thus, we do not expect this to be a major cause of concern at this point.

- Maintain overweight. Overall March leading indicators remained soft, but this was contributed mainly by a subdued corporate segment. We believe this was due mainly to a wait-and-see stance adopted by most business owners. The positive news is the revival in the mortgage and auto segments for both the loans approved and applied. The latest industry statistics is consistent with our recent company visits, whereby we expect revenue to be soft in 1Q. Our top picks are AF and CIMB.

Source: AmeSecurities