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The local stock market rebound so far has been anchored by a rally in glove makers, bypassing banks, which have been sold-down following the Covid-19 pandemic outbreak and the collapse in oil price.
However, interest has started shifting back towards banking stocks on expectations of an economic recovery trickling in from the third quarter onwards. KAF Equities in a recent strategy report noted that the sector’s price to book multiples have fallen below 2008 global financial crisis (GFC)’s trough. It said similar to previous recovery cycles, it expects market ascendancy to be anchored by the banks as was the case in 2009.
But for the short-term expect more negative news flow on the earnings front in the next few quarters because of rising credit costs from deterioration in asset quality.

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