Investors are selling banking shares on fear that weaker economic data would lead to a rate cut by BNM

by SHAZNI ONG

BANKING counters on Bursa Malaysia were among the worst-performing counters in terms of loss in market value in the first half (1H) of the year, after posting drops in quarterly earnings in a weaker economic environment and volatile global markets.

The country’s largest lender, Malayan Banking Bhd (Maybank), lost some 4.78% or RM5 billion in value in the 1H, but remained the most valuable company in terms of market capitalisation at RM99.8 billion.

Maybank’s net profit for the first quarter (1Q) which ended on March 31, dropped 3.3% year-on-year (YoY) to RM1.81 billion.

CIMB Group Holdings Bhd’s market value fell by 4.17% or RM2.28 billion to RM52.33 billion over the past six months on weaker earnings in the 1Q.

CIMB Group’s net profit slipped 8.7% YoY to RM1.19 billion in the 1Q, but the lender remains fifth in the top 100 companies rankings by market value.

Public Bank Bhd, the second-largest company by market value on Bursa Malaysia, saw its market value slipped 7.1% or RM6.83 billion over the six-month period to RM89.29 billion.

The bank registered a net profit of RM1.41 billion or 36.32 sen per share in the 1Q on the back of healthy loan and deposit growth, coupled with its strong asset quality.

Investors sold banking shares in the 1H on fears the weaker economic data would lead to a rate cut by Bank Negara Malaysia (BNM) which would hurt banking profits.

In May, the central bank reduced the Overnight Policy Rate by 25 basis points to 3%, the first cut in three years, as economic conditions continued to moderate.

National oil conglomerate, Petroliam Nasional Bhd’s listed downstream companies also saw loss in value in the period due to lower product prices and demand.

Petronas Chemicals Group Bhd (PetChem) which is in the fourth-largest company by market value on the exchange, saw its market value dropped 9.58% or RM7.12 billion to RM67.2 billion at the end of last month on weaker earnings.

PetChem reported a net profit of RM802 million for the 1Q, a 24.7% YoY reduction, due to lower product prices and sales volumes as well as higher operating expenditure relating to maintenance activities.

The petrochemical sector slowed during the quarter on market uncertainties as well as lower crude oil prices and demand.

Natural gas supplier, Petronas Gas Bhd (PetGas), saw its market capitalisation dipped 9.58% or RM3.64 billion to RM34.35 billion as of June 30, and saw it ease three spots to the 12th position in the ranking.

The fall in value came despite PetGas booking an increase in net profit to RM515.46 million or 26 sen earnings per share for its 1Q.

Lotte Chemical Titan Holding Bhd slipped badly in the rankings, falling 14 spots to No 50 as its market value fell 35.52% or RM3.73 billion over the six-month period to RM6.77 billion at the end of last month on weak financial results.

Lotte Chemical’s net profit for 1Q, plunged 77.14% YoY to RM55.83 million due to margin squeeze resulting from a fall in chemical product selling prices.

Other listed companies which saw a big drop in market value were glove maker Hartalega Holdings Bhd and British American Tobacco Bhd (BAT).

Hartalega, which is the world’s largest nitrile glove manufacturer, saw its market value dropped 14.28% or RM2.92 billion to RM17.53 billion over the past six months due to weaker earnings.

The company moved three spots down to the 26th in the market value ranking.

Its net profit for its 4Q fell 21.67% YoY to RM91.36 million due to the higher labour and electricity cost and lower foreign-exchange gains.

BAT saw its market capitalisation dipped 20.19% or RM2.08 billion to RM8.22 billion over the same period as it continued to lose market share to illegal cigarettes.

The British multinational cigarette and tobacco products maker fell to the 42nd position in market value rankings from 37th place at the beginning of the year as its net profit fell 7.9% YoY to RM88.6 million for its 1Q due to the ban on smoking in public places, the impact from the Sales and Service Tax implementation and illegal cigarettes being sold widely.