Malaysian Banks Likely Facing Constraints from Fund Outflows, KLCI Rebalancing

Dow Jones14:20

0620 GMT - Malaysia's banking sector is likely facing constrains regarding its valuations due to continued foreign fund outflows and uninspiring interim dividends, TA Securities analyst Li Hsia Wong says in a note. Portfolio repositioning ahead of the expanded KLCI 50 benchmark in December could also result in lower weightings for several large-cap banks, she says. However, the operating outlook could stay supportive, driven by steady loan growth, resilient non-interest income, stable asset quality and strong capital and liquidity buffers, she says. TA Securities maintains a neutral rating on the sector, pegging Alliance Bank Malaysia as top pick citing its industry-leading loan growth, robust asset quality and resilient funding profile.

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