PETALING JAYA: Banking counters on Bursa Malaysia came under heavy selling today as the country’s economy posted the weakest growth since the end of the 2008-09 financial crisis, prompting hopes of further rate cuts.
The financial services index slumped as much as 311.78 points or 2.1% to 14,601.25 points, before closing at 14,615.63 points, down 297.40 points or 2%.
The losses in heavyweight banking stocks dragged the FBM KLCI down by 8.54 points or 0.55% to close at 1,542.94 points.
Hong Leong Bank Bhd was the top loser among banking stocks, tumbling 70 sen to RM15.44, followed by Public Bank Bhd, Aeon Credit Service (M) Bhd, Hong Leong Financial Group Bhd which declined 52 sen, 30 sen and 22 sen to RM17.78, RM12.90 and RM16.16, respectively.
Meanwhile, Malayan Banking Bhd, CIMB Group Holdings Bhd and RHB Bank Bhd slid 8 sen, 13 sen and 11 sen to RM8.46, RM4.95 and RM5.61, respectively.
Areca Capital CEO Danny Wong said the gross domestic product (GDP) growth figures – 3.6% for the fourth quarter of 2019 and 4.3% for the year – upset market expectations; moreover, the reading was done before the Wuhan coronavirus outbreak.
“Thus, the market takes it negatively and cuts exposure to those sectors including banking which is the proxy to economic growth,” he told SunBiz.
Wong said the lower growth indicates a deterioration of earnings outlook for the banking sector due to lower margins and potentially higher non-performing loan provisions.
Rakuten Trade head of research Kenny Yee, however, said the GDP figures indicate that there might be a slowdown in loan growth for the financial sector, but the selling pressure is a knee-jerk reaction.
“Apart from the cut in the Overnight Policy Rate last month, the fundamentals of the banking sector remain largely unchanged,” he explained.
According to Bank Negara Malaysia, industry loan growth rose to 3.9% year on year in December 2019, from 3.7% in the previous month.