KUALA LUMPUR – Hong Leong Investment Bank Bhd (HLIB) Research maintains its “overweight” stance on the banking sector due to the absence of a recurring prosperity tax and any form of loan moratorium in Budget 2023 as speculated by some factions of the investment fraternity.
“By virtue of this, Budget 2023 is a win for banks. Hence, we continue to view the banking sector positively and opine that the risk-reward profile is skewed to the upside,” it said in its Market Outlook report.
According to the research house, the combination of robust profit growth and undemanding valuations will be the impetus driving performance.
For large-sized banks, such as Maybank, the target price (TP) is RM9.70 for its strong dividend yield.
For mid-sized banks, RHB (TP: RM6.60) is favoured for its high Common Equity Tier 1 (CET1) ratio and attractive price point.
For small-sized banks, all three under HLIB Research coverage are “buy” calls for different reasons: Bank Islam Malaysia Bhd (TP: RM3.00) for its laggard share price showing, Affin Bank (TP: RM2.35) for its special dividends potential and strong financial metrics, and Alliance Bank (TP: RM4.05) for its cash dividend yield of 6% to 7% and large management provision overlay buffer.
On a whole, HLIB Research said the RM372.3 billion Budget 2023 is muted for the market.
“While Budget 2023 was touted to be an ‘election budget’, we felt it was relatively muted from a market perspective with no major wows or shocks. But really, this isn’t a bad thing, considering the previous budget, which spooked the market with its prosperity tax and stock stamp duty hike,” it added.
It said the personal income tax restructuring – 2% reduction for income brackets RM50,000 to RM100,000 and 0.5% increase for RM250,000 to RM400,000 – results to a RM250 to RM1,000 rise in annual disposable income for taxpayers (those above the RM50,000 income bracket) or RM800 million in totality.
“This would more than offset the marginal reduction in Bantuan Keluarga Malaysia cash handouts at RM7.8 billion for 2023 (2022: RM8.2 billion),” HLIB Research said.
The research house added: “Conspicuously silent was the absence of any mention on the goods and services tax or targeted fuel subsidies – understandable though, as the 15th general election is nigh.
Still, taking a cue from the Finance Ministry’s consumer price index projection of 2.8% to 3.3% in 2023, this suggests there could be plans for a modest increase in pump price.” – Bernama, October 9, 2022
