Banks
Sector Note - Greater risk appetite? - by Mulya Chandra CFA ( - )
The current bear market has led to fragmentary valuations for Indonesian banking stocks. BCA is trading at a valuation premium to BRI on risk aversion. However, we note a slight improvement in investors' risk appetite as signalled by a down trend in bond yields. If this continues, we believe the BCA-BRI valuation gap would narrow, and recommend a switch out of BCA to BRI. We also downgrade BCA to Neutral from Outperform on higher provisioning assumptions. Mandiri should be the next favourite of investors, but only if yields continue to come down. Maintain Neutral on the sector.
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