LOCAL BANKS STAND TALL DESPITE GLOBAL FALLOUT

By M. Saraswathi

KUALA LUMPUR, Dec 17 (Bernama) - Malaysian banks are poised to make an
unprecedented regional impact, via acquisitions and foreign listings, next year
after having stood firm in 2009.

The year was marked by an almost shattered global banking and financial
industry as 115 banks fell from the fallout of the credit crunch.

The silver lining was obviously the announcement by CIMB Group Holdings Bhd,
the country's second largest financial services provider in terms of assets, to
move for a dual-listing on the Stock Exchange of Thailand (SET) as part of
efforts to stamp its regional presence.

The dual-listing, expected to be completed in the first-half of next year,
will be the first on the SET and rank among the top three-listed companies.

"It may not only be a flamboyant start for the banking industry next year
but also a trendsetter as there are other Malaysian banks with regional presence
which could make the same move," said an analyst when contacted by Bernama.

Listing in the respective market gives a sense of belonging, and by far, a
bigger market reach in both consumer and business sectors, he said.

At the beginning of the crisis in 2008 and earlier this year, Malaysian
financial and banking institutions felt the pinch, in terms of reduced loans
growth, with some taking measures to reduce workforce.

All forward loan indicators rebounded in September 2009 due to improved
consumer and business sentiment with overall loans application surging 5.1
per cent, year-on-year, compared with -16.8 per cent in 2008.

Loans obtained were mainly for the purchase of residential properties and
passenger cars.

Besides the RM67 billion (US$19.5 billion) stimulus package and the Central
Bank's accommodative policy, which helped cushion the country's economy overall,
the government's bold measures in liberalising the sector helped it to remain
vibrant.

Malaysia's Central Bank also announced, at end 2008, blanket guarantee on
local and foreign-currency bank deposits until end-2010.

The central bank also kept the overnight policy rate at the lowest level
of two per cent.

The Malaysian Institute of Economic Research (MIER) recently said it expects
the overnight policy rate to be relatively unchanged at least until the end of
2010.

The government too several initiatives, including liberalisation of
the sector, to strengthen the international dimension of the Islamic financial
system and increase the inter-linkages with other parts of the world.

Earlier this year, Prime Minister Najib Razak announced several
liberalisation measures which will open the doors for another seven new foreign
banks to participate in Malaysia's financial sector between 2009 and 2012.

Included in the liberalisation measures are increasing foreign equity
holdings to 70 per cent in investment banks, Islamic banks, insurance companies
and takaful operations.

Insurance and takaful operators are now allowed to open more branches while
foreign commercial banks are accorded greater flexibility to open additional
branches on a progressive basis.

Two mega Islamic Bank licences, with a paid-up capital of US$1 billion, was
also announced.

Central Bank Governor Dr Zeti Akhtar Aziz indicated that interest
to take up the banking licence has been extremely good.

Meanwhile, the Ringgit also performed fairly well against all other major
currencies namely the greenback, yen and the pound sterling.

However, there could be serious problems in the exchange rate alignment next
year, especially with the re-pegging of the Chinese yuan to the US dollar, said
MIER's out-going Executive Director Emeritus Professor Dr Mohamed Ariff.

"The dollar is overvalued and the yuan is undervalued. How can you put
these things together?. It won't hold on for long," he said recently, expecting
a volatile exchange rate in coming months.

"It's going to be a serious problem that no central bank can
single-handedly deal with. They have to get together and take a coordinated
measure," he cautioned.
-- BERNAMA