RHB Research thinks that local banks should continue to offer investors a good defensive option to tide through the external volatility.
PETALING JAYA: The establishment of the Forest City Special Financial Zone (SFZ) in Johor is seen as a significant step toward becoming a regional financial hub, according to analysts.
TA Research expects the SFZ to drive a spillover in demand for investments and financial services.
“We note that the SFZ offers several strategic benefits that make it an attractive financial hub. One of its standout features is foreign-exchange flexibility, which allows unrestricted offshore borrowing in foreign currencies and investments in foreign-currency assets.
“It also provides strong incentives for sustainability-driven activities and appealing tax packages, creating a supportive environment for diverse financial services, including fintech firms and family offices,” the research house said, adding that it believed these measures could help attract high and ultra-high-net-worth individuals.
In addition, it pointed out that preferential tax rates for returning experts and knowledge workers could help deepen the local talent pool and mitigate brain drain, thus further strengthening the SFZ’s financial ecosystem.
Essentially, TA Research said it foresees the SFZ presenting a compelling growth opportunity for the financial sector as banks play a critical role in driving cross-border financial integration and economic expansion.
“We believe banks with an established presence in Singapore and Johor, such as Malayan Banking Bhd
(Maybank), CIMB Group Holdings Bhd, Hong Leong Bank Bhd and RHB Bank Bhd, are particularly well-positioned to capitalise on the growth opportunity in this state.
“The ability to facilitate smoother cross-border financial services will be a key advantage, making them a one-stop solution for investors and businesses in both Johor and Singapore. This includes enabling more seamless trade, enhanced credit facilities, and offering more comprehensive financial solutions,” it said.
The research house maintained an “overweight” call on the sector, with its top three picks – Public Bank Bhd, CIMB and Maybank – to benefit from a rise in domestic spending, solid economic prospects, robust investments and increased capital activity.
However, TA Research cautioned that competition among local banks in Johor will likely intensify as locally incorporated foreign banks, such as UOB and OCBC, each already having around seven branches in Johor, will enjoy regulatory flexibility to open additional branches within the SFZ.
“Nevertheless, we believe all banks are poised to benefit from the overall increase in business activity,” it added.
