Nomura Research places Malaysian banks to be the least attractive among key Southeast Asian banks.

The research house places the Philippines' banks, Thailand, Indonesia, and Singapore -in that order- to be above Malaysian banks in current market environment.

In their Anchor Report, Nomura states that investors have to be "more selective in 2018 due to strong 2017 performance" and that investors need "more focused on macroeconomy-to-banking harmonisation as key criteria (in investing)'.

The Japanese-based research house says that their analysis is based on a few factors. First, growth prospects at the macro and banking level of each country. Second, earnings growth potential of the banks under coverage, and third, comparison of share price valuation.

Nomura stated that they "think this is especially important as 2017 thus far has been an outstanding year for the ASEAN-5 banking sector, yielding and average YTD price performance of 22.5%, 7.8 percentage points above the ASEAN-5’s average YTD price performance of 14.7%.

NOMURA'S PECKING ORDER OF INVESTING MARKETS

In the report, Nomura Research says that they are more optimistic on the Philippines and Thailand banks than they are to Indonesian, Singaporean and Malaysian banks.

They believe that in the Philippines, banks are on "All cylinders fired for further rerating, led by the fastest-growing economy in Asia, which has high correlation to strong credit growth". Nomura added that the asset quality of these banks remains benign, as the system non performing loans (NPL) ratio is the lowest in ASEAN-5.

For the Thailand banks, Nomura argues that they are in early stages of earnings recovery as the Thai banking system exits the peak of the NPL cycle. With asset quality improvements have not yet fully been priced in, Nomura has upgraded two banks to Buy in 2017, and have Buy calls on four of eight stocks under their coverage.

MALAYSIAN BANKS NOT ATTRACTIVE?

Nomura has a balanced view on Malaysian banks. They say that "despite stronger economic growth, we are not seeing a translation to faster loan growth. A potential policy rate hike could put more pressure on growth. With weaker ROEs, valuations for MY banks seem stretched relative to other ASEAN banks".

This is coming after the Bank Negara Malaysia (BNM) Governor Tan Sri Muhammad Ibrahim stated on Monday that Malaysian banks must avoid the rush in getting deposits. It is with a clear and unequivocal statement coming in from the central bank that such behavior could prove detrimental to the banking system as this 'rush' could push up pricing costs amongst treasuries in the market.