KUALA LUMPUR: The banking sector will not be prime beneficiaries of the country's current hot data centre (DC) boom, said Hong Leong Investment Bank Bhd (HLIB Research).
While HLIB acknowledged the potential economic benefits that DC investments have to offer, the bank did not see that Malaysia's total approved investments (TI) spike in the past translated to sharper growth in overall business, small and medium enterprises (SME), and house and home (HH) loans.
Meanwhile, HLIB Research said large construction awards led to quicker construction loan growth, but the impact on the credit system was limited.
"Furthermore, bottom-line sensitivity to lending growth is not material.
"Overall, we find banks are not prime beneficiaries of the currently hot DC boom," it said.
However, HLIB Research said the market perceives otherwise and expects more significant spillovers.
Broadly, the investment bank did not see SME loans accelerating strongly because of higher TI in the past.
"Instead, SMEs now have alternative sources of funding through peer-to-peer (p2p) lending, which is a growing market," it said.
As for the spillover to individuals via DC's job creation and higher wages, HLIB said it could take longer, perhaps only from 2026 onwards, since investments here are just in their planning and construction phases.
"That said, there were no clear substantial growth patterns in private consumption and HH loans for the several years following the spike in TI as well.
"Hence, we advise investors to exercise caution," it said.
HLIB Research maintain neutrality in the sector with buy calls for Public Bank Bhd, AMMB Holdings Bhd (Ambank Group), and Alliance Bank Bhd,