KUALA LUMPUR, Oct 5 — Kenanga Investment Bank Bhd expects the overnight policy rate (OPR) to remain stable at 3.0 per cent throughout 2025.

In a research note, the bank said its forecast was based on data-driven findings, citing the need to manage higher-than-expected inflation, which could arise from the spillover effects of targeted fuel subsidies and fluctuating input costs.

"With regard to monetary policy, Bank Negara Malaysia (BNM) is likely to make OPR decisions independently of regional markets, given the differing inflationary pressures and economic trajectories,” it said.

The bank also highlighted BNM’s financial stability review (FSR) for the first half of 2024, which showed the banking sector had improved sequentially since the previous review, supported by a strong macroeconomic environment.

Kenanga maintained its ‘overweight’ stance on the sector, noting that valuations are expected to rise further, buoyed by the return of foreign investors to Malaysian banks.

"For our top picks, we see opportunities in the laggards, albeit we continue to favour high-quality names such as Public Bank Bhd (outperform (OP), target price (TP): RM5.10), Hong Leong Bank Bhd (OP, TP: RM27.40), and RHB Bank Bhd (OP, TP: RM7.55),” it said.

RHB Bank, in particular, was highlighted as an attractive dividend play, offering a yield of around 7 per cent, with asset quality issues now largely resolved, it added. — Bernama