KUALA LUMPUR: Kenanga Research feels there could be another cut in the overnight policy rate (OPR) this year after Bank Negara Malaysia reduced the rate by 25 basis points (bps) yesterday.
The research house said the decision made by Bank Negara was within its expectations, bringing the key interes rate to a historical low of 1.75 per cent.
Kenanga Reseerch said among the banks, Alliance Bank Malaysia Bhd was more sensitive to a change in the policy rate.
"Moving forward, our economist sees a dovish central basis and is now pencilling in another 25bps OPR cut at the September Monetary Policy Committee (MPC) meeting," it said today.
The firm said while the near-term negative for margins, the aggressive policy rate cuts might help to curb the rise in gross impaired loan ahead.
At this stage, banks have little visibility as to how severe the Covid-19 pandemic has had on asset quality as the loan moratorium and various lending programs to small and medium enterprises have kicked the can down the road into 2021.
"For now, we are keeping our 'neutral' call on the banking sector with RHB Bank Bhd (outperform, target price: RM6.00) as our top pick," Kenanga Research said.