Market Outlook as at April 17, 201918th April 2019
Chart 12; USD-MYR’s weekly chart as at April 17, 2019_3.00 (Source: malaysiastock.,biz)
In stock market, timing is everything. The current decline in Maybank share price is driven by development in one of its Singapore subsidiary’s loans to the Hyflux group (actually to 2 subsidiaries, Tuasone & Tuaspring Pte Ltd). These loans, collectively account for 4.1% of Maybank Singapore’s total assets, may not be settled soon as the white knight for the rescue of the Hyflux has pulled out.
News reports that Singapore PUB is now likely to step in to takeover the 2 companies as its assets are deemed to be of national interest. Analysts believe that Maybank is likely to receive a fair settlement of the loans granted, with possibly a small loss. In any event, Maybank Singapore has provided SGD106 million for its exposure to these 2 companies totaling SGD659 million. I find the analysts’ reasoning to be logically sound. Thus I feel that the selldown may be overdone.
Looking at Maybank share price decline, it seems that the market is pricing in a big loss for the Hyflux loans. If that turned out to be incorrect, we can expect a nice recovery for Maybank in the near future.
Chart 2: Maybank’s daily chart as at April 17, 2019_3.00 (Source: malaysiastock.,biz)
Meanwhile CIMB has been dropping steadily for the past 6-7 weeks. One of the factors causing the drop is the fear of an upset in the Indonesian Presidential Election. The logic behind this line of thought is that a victory for the challenger, Prabowo would lead to economic slowdown which would affect CIMB Niaga’s profit. CIMB Niaga contributes more than 20% of the CIMB group bottom-line.
I find this effort of logic to be extreme. Personally, I believe Jokowi is likely to win, and even if there were to be an upset, I believe Prabowo is pragmatic enough to avoid instituting policies that would lead to economic slowdown which would in turn affect his chance of election for the second term.
Chart 4; CIMB’s daily chart as at April 17, 2019_3.00 (Source: malaysiastock.,biz)
Based on the above, I believe Maybank and CIMB are worth considering for long-term investment after the selldown in the past few weeks.
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