HLIB Research Summary - 1 Oct 2014

Banking (NEUTRAL)

Aug Stats – Strong Business Leading Indicators

• Loans growth slowed by 2bps 8.61% yoy on marginal slowdown in both business and household segments.
• Applications and approvals higher mom and reversed to yoy growth but approval rate slightly lower. Business applications strong (4^th consecutive mom growth and (3^th consecutive double-digit growth) while approvals increased. 
• This reaffirms our view of revival in business loans growth and helps mitigate slowdown in household.  Thus, keep our 2014 loans growth projection at 9%.
• Deposits contracted mom, higher LD ratio and lower excess liquidity of RM284bn (but still ample).
• ALR higher 3^rd consecutive month thanks to OPR hike in Jul 14.  Reiterate that it will help sustain rather than boost NIM.  Moreover, contraction in deposits will intensify competition.  
• Asset quality and capital ratios improved.
• Maintain Neutral and top picks as Maybank, RHB Cap and AFG. 

Economics: Highlights of BNM Statistics (Aug 2014)

• M3 growth decreased to 4.8% in Aug (Jul: +5.7%), the slowest since Mar-02. Narrow money M1 also slowed to 7.7% yoy (Jul: +9.1% yoy).
• The second consecutive month of weakness in money supply growth pointed to a more moderate economic activity in 3Q14, which reinforces our view that GDP growth would moderate to 5.6% in 2H14 from 6.3% in 1H14 (full year forecast at 6.0%).
• Household loan-deposit growth gap remained wide, with household loan and deposit growth remaining largely stable at 11.0% yoy and 6.3% yoy respectively (Jul: +11.1% yoy & +6.4% yoy respectively).
• Backed by slower domestic financial activities, weaker economic performance in developed countries and waning enthusiasm on property speculation, we expect the OPR to be held steady at 3.25% in Nov MPC meeting.
• Excess liquidity in the banking system, which amounted to RM239.3bn as at end-Aug (Jul: RM237.9bn), remained ample to support growth accommodation in the near term.

Traders Brief: Sideways post 3Q14 window dressing

• Despite fizzling off after testing briefly our envisaged immediate resistance at 200-d SMA (now 1852) yesterday, KLCI’s recent rebound from 1829 on 26 Sep (6-month low) still looks sustainable, supported by the formations of three Hammers on 18/23/26 Sep and bottoming out oscillators.
• Key resistance is 1852 or 200-d SMA. A strong breakout above 1852 will spur KLCI higher to retest 1860 (30-d SMA) and 1867 (23.6% FR) levels. Conversely, KLCI continue to trade range bound within 1830-1840 zones. A close below 1830 will open up to retest 1818 (61.8% FR) lower support.
• Today’s recommendation: Momentum Sell on  TEOSENG 

Momentum Idea: TEOSENG – Sell into rally

• Yesterday’s black candlestick pointed to an imminent correction in near term. Hence, we view that the bullish trend is likely to halt and subsequently correct itself as both hourly and daily oscillators (RSI, MACD and Slow Stochastics) indicate overbought signal. Noticeably, share price is in Upper-Bollinger band, profit-taking activities are likely to occur. Immediate supports are located at RM2.26, RM2.22 and RM2.15. Critical resistances are situated at RM2.48, RM2.52 and RM2.56.