PETALING JAYA: Malaysian banking stocks took a beating this week, and according to analysts, this was mainly due to selling by foreign shareholders on the back of a declining economic outlook. Banking stocks affected the most are CIMB Group Holdings Bhd and RHB Capital Bhd.
CIMB's share price dropped a staggering 11.2% over the week to close Friday at RM7.04. This is a drop of 89 sen, equivalent to RM6.6bil being wiped out of its market capitalisation. It briefly touched RM6.95 on Friday, which also marked its new one-year low.
RHB Capital dropped 86 sen or 9.6% this week, meaning some RM1.87bil in market capitalisation has been erased.
On Friday alone, the free fall continued, with CIMB dropping 21 sen to RM7.04 on volume of 56.02 million shares. RHB Capital also dropped 22 sen to RM8.10 on volume of 5.6 million shares.
Analyst have attributed the selldown to a few factors, including CIMB missing its earnings estimates and heavy selling by foreign shareholders.
With a foreign ownership of 38.4%, CIMB is a Malaysian blue chip with one of the highest foreign institutional shareholdings. Foreign portfolio funds own about 13% of RHB.
CIMB's second quarter net earnings to June 30 was up 9.1% to RM970mil. However, this was 9.2% below annualised consensus forecast of RM4.21bil.
Annualised loan growth of 11% was below the company's earlier guidance of an 18% overall loan growth for its financial year ended December 2011.
Furthermore, with CIMB Group chief executive Datuk Seri Nazir Razak turning cautious, this is a cause for concern among foreign investors, say analysts.
During CIMB's analyst and media briefing on Tuesday, Nazir said he was turning cautious on the back of weakening Western economies, which were not just volatile, but also “diminishing in trust”. He said this could potentially cause a repeat of 2008 (credit crisis in the United States).
“The Asean region is strong, but it doesn't have much fiscal space to offset the deteriorating external outlook. Unlike in 2008, we may not be as immune to that crisis this time,” said Nazir.
A regional banking analyst said: “Nazir has credibility and a big following among foreigners. So if what he says about the banking system turns out to be true, then there is reason for them to be cautious, and perhaps trim their holdings.”
It could also be a case of taking profit out of Malaysia for investment into other cheaper markets.
“Most foreign investors who buy into CIMB handle regional portfolios. Relative to the region, the Malaysian market has done well. So it's very natural for them to take profit from Malaysia and put it somewhere else,” said a foreign based banking analyst.
He added that the valuation gap between the regional and Malaysian banks were widening. Regional banks were trading at an average of 9 times earnings, while Malaysian banks enjoy a price earnings ratio of 13 times, he said.
Meanwhile, Credit Suisse estimated that “CIMB accounts for an estimated 16% of total foreign investor holdings in Malaysia”.
By TEE LIN SAY
linsay@thestar.com.my
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