Stocks hit in aftermath of policy rate cut
Investors dumped banking stocks on concerns that banks may reduce loan rate after the Monetary Policy Committee (MPC)'s policy rate cut, which could lower banks' profits.
The MPC slashed its policy rate by 25 basis points to 2.75 per cent last Wednesday.
Siam Commercial Bank (SCB) closed the morning trading session at Bt161, down Bt4, or 2.42 per cent. Bangkok Bank (BBL) dropped Bt1.50, or 0.79 per cent to Bt187.50. Kasikornbank (KBANK) closed down Bt2.50, or 1.42 per cent, to Bt173.50.
Krungthai Bank edged down Bt0.10, or 0.53 per cent, to Bt18.70. TMB Bank lowered Bt0.02, or 1.07 per cent, to Bt1.85.
Usanee Liewrat, an analyst at Asia Plus Securities, said that banking share prices dropped on profit-taking as investors expect banks to follow the 25 basis points cut in the policy rate.
“Banking share prices plummeted on profit-taking after the announcement of third-quarter earnings performance. Investors have turned to invest in real-sector stocks. They are also worried that banks may have to lower interest rates following the central bank’s rate cut.
However, we expect banks not to lower interest rates due to high demand for loans. This is the opportunity for gradual investment when share prices drop,” she said.
Asia Plus Securities also raised its weight on banking stocks as their earning performance came as expected.
A Capital Nomura Securities analyst expected large-sized banks to see a 2-3 per cent profit drop from the policy-rate cut.
Among Thai commercial banks, DBS Vickers Securities (Thailand) picked KBANK due to its consistent profitability from a balanced loan portfolio. Its small-and medium-sized enterprise loans, which account for 40 per cent of total loan portfolio, remain its strength with low funding costs.
“We recommend it [KBANK] due to its profitability and increase in return on shareholders’ equity for the past years, a DBS Vickers Securities analyst said.
KBANK’s third-quarter net profit grew 19 per cent from the same period of last year to Bt9.2 billion and was 4 per cent higher than DBS Vickers Securities expected.
Its third-quarter pre-tax profit rose 12 per cent from the same period a year before. The profit rise came from stable interest receivables and 13-per-cent growth in fee-based income.
The bank’s asset quality remains robust. Its non-performing loans stayed at 1.9 per cent of total outstanding loans at the end of this year’s third quarter.
In response to the policy rate cut, Bualuang Securities lowered returns on its six-month fixed-income fund – B-Fixterm 46/12 – to 3 per cent. The fund opened for subscription on Wednesday and closes on Monday.
Sopawadee Lertmanaschai, GPF secretary-general, said that the policy rate cut came as a surprise for the Government Pension Fund (GPF) and that could drag down returns on fixed income instruments. Government bonds' yield rose yesterday.
“All fixed income investors, not only us, are affected. We have to accept it," she said, adding that GPF hopes there will be no more surprise in the last three months of this year.
Currently, GPF's investment totalled Bt580 billion, of which 60 per cent or Bt250 billion are invested in government bonds with about 3 per cent return, 10 per cent in the Global fixed income with 5-6 per cent returns, 8-9 per cent in Thai stock market with 26 per cent return, and 8-9 per cent in the Global equities with 10 per cent return.
