Banking (Overweight '')

Profit Plunge? NO, But Higher Risk

'''' Studied trend and regression of asset quality, non-interest income, loans growth and NIM against net profit.''

'''' Asset quality and non-interest income high correlation.''

'''' Asset quality more impactful but still at strongest position and intact.'' Corporate and household financially healthy.''

'''' Non-interest income hit will be significant if anomaly in credit spread and RM depreciation, both unlikely at this juncture.

'''' Loans growth and NIM has low correlation, may not have impact if two other variables held up.

'''' Sharp earnings plunge unlikely but factored higher risk premium into our Gordon growth valuation model.''

'''' No recession yet and still see potential returns despite lower target prices (-2 to -13%), especially after recent sharp retracement in share prices.

'''' Maintain Overweight.

'''' Slight change in top picks preference - Maybank, AMMB, RHB Cap, CIMB and AFG.''

''

FBM KLCI - External factors rule

'''' Given that the KLCI is still unable to violate immediate resistance levels of 10-d SMA and mid Bollinger band, near term outlook will remain negative and the index is likely to retest the 1445 pts (lower Bollinger band). A breach below this support will push index lower towards YTD low of 1423 and 1400 levels.

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Stock to watch - PERISAI:'' Must break above 200-d SMA for more gains''

'''' After the plunge to RM0.59 on 9 Aug, share prices recovered to as high as RM0.74 (16 Aug) but buying momentum fizzled out, resulting in another fall in prices to as low as RM0.63 before ending at RM0.65 yesterday.

'''' There is a potential technical rebound as hourly indicators are painting reversal signals coupled with the morning Doji star formation in the daily charts. If Perisai can breach the 200-d SMA near RM0.69, more upside is in place towards RM0.76 (100-d SMA) and RM0.82 (23.6% FR). Supports are RM0.59-0.63. Cut loss below RM0.58.