Malaysian banks maintained as 'overweight' on budget incentives

Malaysian banks maintained as 'overweight' on budget incentives - DBS Vickers
10/09/2007 15:16:00
KUALA LUMPUR (Thomson Financial) - DBS Vickers Research said Monday it is
keeping its "overweight" rating on Malaysian banks as the sector emerges as a
key beneficiary of incentives for the capital market and property sector
announced Friday in the national budget for 2008.
In his budget speech to parliament, Prime Minister Abdullah Ahmad Badawi
announced that the commission rates for Internet trading and cash upfront
transactions will be fully negotiable. This is to encourage greater retail
participation in the stock market, he said.
In addition, clearing fees for share purchases will be reduced from 0.04
percent to 0.03 percent from January 1, 2008.
The government also proposed to extend the stamp duty exemption on instruments
related to mergers and acquisitions of listed companies to 2010 from 2007.
Meanwhile, in order to promote growth in the property sector, the government
proposed a 50 percent stamp duty exemption on documents of transfer for the
purchase of one house per individual costing under 250,000 ringgit.
It will also allow monthly withdrawals from the state pension fund for housing
loan repayments.
"Higher than expected capital market flows would act as earnings catalysts to
banks," said DBS Vickers Research in a note to clients.
Bumiputra-Commerce Holdings Bhd and AMMB Holdings Bhd, the two largest players
in the local investment banking market, will be the key beneficiaries of
increased capital market activities as a result of the incentives announced
Friday, it said.
Meanwhile, Malaysia's third-largest bank Public Bank Bhd will benefit from
incentives to the property sector given its leading position in mortgage
financing, DBS Vickers said.
"We expect to see stronger mortgage loan growth in the next few quarters from
this move," it said.
The government also proposed in the budget the implementation of the
single-tier tax system, under which dividends can be more easily distributed as
profits are only taxed at the company level and dividends received will be
exempted from tax.
The proposed single-tier tax system would be a boon to dividend-yielding stocks
like Public Bank, DBS Vickers said.
"We are forecasting total dividend per share of 70 sen for financial year 2007
and 85 sen for 2008. At current prices, gross yields amount to 7-8 percent," it
said.
The brokerage is keeping its "buy" on the foreign tranche of Public Bank shares
with a target price of 11.80 ringgit. The foreign tranche shares carry no voting
rights and trade under the ticker PBBank-O1.
At 2.36 pm, PBBank-O1 was down 20 sen or 2 percent at 10.00 ringgit, AMMB lost
12 sen or 2.7 percent to 4.30 ringgit and Bumiputra-Commerce was unchanged at
10.60 ringgit.
The Kuala Lumpur Composite Index was down 22.5 points or 1.7 percent at
1,282.40.


Source: Osk Wire News