KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) is expecting another 25 basis points hike in BNM's overnight policy rate (OPR) to 3.25 per cent, as soon as this week's Monetary Policy Committee (MPC).
Malaysia and regional head of equity research Anand Pathmakanthan said this is due to the revised federal funds rate (FFR) outlook, as well as a worryingly weak ringgit which prompted Bank Negara Malaysia (BNM) last week to openly state it will intervene in foreign exchange markets to "stabilise' the local currency.
He added that based on the June projection, the federal funds rate (FFR) could reach 5.625 per cent by year-end, implying two more rounds of 25 basis point increases.
"Notwithstanding 125 basis points increase in OPR from its' pandemic low of 1.75 per cent, and related attraction of rising fixed deposit returns (industry CASA ratio peaked at 32.9 per cent in April 2022 and has since declined to 28.9 per cent in May 2023; it was 26.5 per cent in Dec 2019).
"The gap with Bursa's market average dividend yield of 4.5 per cent remains attractively wide, the latter elevated by a combination of resilient corporate free cash flows and a de-rated market that now has the KLCI trading on just 12 times forward price-to-earnings ratio (PER)," he said in a note today.
Anand said potentially pivotal state elections in August, followed by Budget 2024, means the second half of 2023 (2H23) will remain challenging re building market traction – investors may be best served positioning in defensive dividend stocks to at least lock in the yield return.
"Our list of screened dividend picks, with five per cent to ten per cent cash yields, include MBM Resources Bhd, Allianz Malaysia Bhd, RHB Bank Bhd, Tenaga Nasional Bhd, Gas Malaysia Bhd, Sime Darby Bhd, Sentral Real Estate Investment Trust (REIT), Axis REIT, MISC Bhd and Malakoff Corp Bhd," he said.