- Net foreign selling in banking stocks. Foreign shareholdings in most banks continued to drop in the last two months, based on the latest available data.

- CIMB’s foreign shareholding continued to fall in February 2014. CIMB’s foreign shareholding extended its downward trend for ninth consecutive months, with foreign shareholding falling to 33.6% in end-February 2014 and 33.8% as at end-January 2014, from 34.5% in end-December 2013. The recent peak was 42.7% in end-May 2013 (see Chart 1 in page 2).

- Maybank’s foreign shareholding also fell in February 2004. Maybank’s foreign shareholding also declined, to 21.29% on 21 February 2014, from 21.40% in end-January 2014 and 21.7% in end-December 2013. Foreign shareholding has been declining gradually since the most recent high of 25.99% in May 2013 (see Chart 2 in page 2).

- Even PBB’s foreign shareholding has started to drop as well in December 2013. PBB registered a drop in foreign shareholding to 30.71% in December 2013, from 31.71% in September 2013. This is the first quarterly drop in three quarters (see Chart 3 in page 3). Previously, PBB recorded an upward increase in foreign shareholding in June 2013 (31.33%) and September 2013 (31.71%).

- Sector rating maintained as NEUTRAL. Despite the generally lower foreign shareholding, we remain cautious on the sector. Recall the latest results season indicate rising LDR, with the key new information being most banks hinting of rising price pressure in the deposit market. This affirms our view that there may be less ample domestic liquidity ahead, which gives rise to uncertainty over cost of funding, as well as possibility of rising impaired loans.

- We are projecting flat net earnings growth of 2.3% for 2014 compared to consensus’ 8.0%. To recap, we forecast sector net earnings growth at 2.3% for 2014 and 5.0% for 2015, calendar year basis. Our sector net earnings growth forecast is below consensus’ 8.0% YoY growth for 2014. Our sector loans growth assumption from a bottom-up approach is relatively unchanged at 8.2% for 2014 and 8.3% for 2015. Our sector NIM assumption is -6bps YoY for FY14, and a stable NIM for FY15. Our non-interest income growth assumption is 8.5% for 2014 and 7.1% for 2015. We are maintaining sector credit costs assumptions for the banks at 37bps for 2014F and 27bps for 2015F. We maintain our neutral stance on the sector.

Source: AmeSecurities