AmInvestment Upgrades Malaysian Banks to Overweight on Capital Management Potential

AmInvestment Bank Bhd has upgraded the Malaysian banking sector to Overweight from Neutral, citing significant re-rating potential into 2026 despite recent strong rallies. Analysts believe banks are only in the early stages of a capital management cycle, similar to Singapore peers who continued gaining months after announcements.

Malaysian Banks

Key supports include undemanding valuations at 0.92x P/B (-2SD below pre-Covid mean), resilient earnings, and a supportive Fed easing cycle likely to attract foreign inflows after three years of net selling.

Sector profit is projected to grow 4.9% in 2026 with stable 9.5% ROE, historically supporting higher P/B multiples. Local funds remain underweight at ~12% of AUM, signalling room for buying. Top picks are HLFG, HLB, and CIMB for their dividend upside and durable returns. Overall, the sector offers compelling yields >5% and favourable risk-reward.