Nomura Equity Research upgraded Malaysia banks to 'overweight', citing their underperformance compared to other banks in the Southeast Asian region and a likely removal of political overhang post the upcoming elections.
"Investors fear a potential knee-jerk sell off once the election is announced. We view such concerns as overdone," the broker said in a report.
Nomura, which counts Malayan Banking Bhd and CIMB Group Holdings Bhd as its large-cap picks for their strong loan growth prospects, said it expects a re-rating of these stocks once the overhang is lifted.
It maintained an 'overweight' rating on Thai banks on their strong earnings growth, with an investment and corporate/small and medium enterprise loan cycle coming through from a depressed base.
Nomura has a 'neutral' rating on Indonesian banks. It kept its 'underweight' rating on Singapore banks citing their weak earnings outlook and low profitability.
It also maintained its 'underweight' rating on Philippine banks, citing high valuations and possible downside risks to earnings given high levels of investment/forex gains and a rising effective tax rate.
ASEAN economies are expected to post relatively strong growth in 2013, helped in part by the government pump priming, with ASEAN banks seen posting average earnings growth of 10 percent in 2013 and 15 percent in 2014, Nomura said.
0343 GMT (Reporting by Viparat Jantraprap in Bangkok; Editing by Bijoy Koyitty)