BIMB Securities Research said the lowering of the OPR to 2.75% is positive for sectors such as automotive, construction, technology, property and real estate investment trusts.
PETALING JAYA: Bank Negara has pulled off a “positive surprise”, benefiting a number of sectors in Malaysia, following the decision to cut its overnight policy rate (OPR) two days ago.
In a note, BIMB Securities Research said the lowering of the OPR to 2.75% is positive for sectors such as automotive, construction, technology, property and real estate investment trusts (REITs).
Selective stocks within the consumer sector are also likely to benefit from lower interest rates.
“We had forecast an unchanged OPR of 3% – and we are glad to be proven wrong.
“This cut acts as a timely booster to support the current economic momentum.
“We view it as mildly supportive for domestic consumption, housing affordability, equity risk sentiment and a potential tailwind for exporters via a softer ringgit,” said BIMB Securities Research.
On the automotive sector, the research house said a reduced OPR ensures cheaper hire purchase loans and this, in turn, supports the demand for mass-market vehicles.
In the construction space, players are likely to enjoy better a funding cost outlook and improved internal rates of return on projects, apart from a stronger tender momentum.
Technology stocks, on the other hand, would see export-oriented gains from a weaker ringgit and cheaper capital expenditures.
It is noteworthy that the interest rate differential between Malaysia and the United States has widened post-OPR and this may weigh on the ringgit’s upward momentum. As for the property sector, a lower OPR provides a mortgage affordability boost for buyers in the middle 40% income group.
Meanwhile, REIT players will see an improved yield spread compared to the Malaysian Government Securities.
On banking stocks, BIMB Securities Research said the impact is “mildly positive”, pointing out that banks with low current account-savings account proportion will benefit the most via slower cost passthrough.
“Net interest margin compression is uneven.”
In a separate note, MIDF Research said one of the most “immediate and visible” beneficiaries of an OPR cut are households.
The OPR, as the benchmark interest rate, influences the cost of borrowing and the overall liquidity in the financial system.
The reduced borrowing costs increase disposable income and potentially stimulate consumer spending.
In addition, lower financing costs make home ownership more accessible.
MIDF Research also pointed out that industries that rely heavily on consumer spending such as retail, automotive, hospitality and tourism are expected to be positively affected by an OPR cut.
“With increased disposable income and cheaper financing options, it may lead to consumers making discretionary purchases despite concerns about potential inflationary pressures.
“The property market is another major beneficiary of an OPR cut.
“Lower interest rates typically lead to increased demand for housing, particularly in the mid-range and affordable segments.
“Prospective buyers are more inclined to enter the market when mortgage rates are favourable, leading to higher transaction volumes.
“Developers, in turn, may accelerate project launches, anticipating improved sales and easier access to financing.
“The cut in the OPR is expected to lead to interest savings for developers. We estimate the earnings impact from interest savings to be below 2% for developers under our coverage,” it added.
The research house also foresees REITs to benefit, as their yields become more attractive relative to fixed-income instruments.
