• Negatives priced in? MAYBANK’s share prices tumbl ed 13.4% from 52- week high of RM8.66 (13 Apr) to a low of RM7.50 (30 Sep low) before ending at RM7.58 yesterday. Tracking K LCI’s consoli dation since hitting YTD high of 1729 on 14 Apr, MAYBANK began consolidating downwards following the downgrade of MSCI weightage (effective 1 June). Sentiment was also dampened by a sluggish 1H16 results, dented by ongoing concerns on asset quality with higher allowances for impai rments (especially in the oil & gas segment) and subdued loans growth in the wake of challenging economic outlook.

• Currently, MAYBANK is trading at 10.6x FY17 P/E (11.7% below its average 5-year average P/E of 12x ), supported by attractive yields of 7.0- 7.4% for FY16-17. We believe such valuations and steeply oversold positions have priced in most of the negatives, providing sufficient margin of safety to cushion further plunge in sharp share.

• Ripe for potential downtrend reversal amid bullish Harami formation. Given the bullish Harami candle formation is near the tail-end of a downtrend channel and supported by uptick in daily indicators, we expect prices to breakout to the upside in the near term. A decisive breakout above the immediate resistance of RM7.72 (50-d SMA) will likely to lift share prices higher towards RM8.00 and our LT objective at RM8.22 (61.8% FR). On the flip side, key supports are RM7.49 and RM7.25 (the DRP fixed price). Cut loss at RM7.23.

Source: Hong Leong Investment Bank Research - 5 Oct 2016