CIRA - Asean Banks Strategy; Opportunity in Adversity—Favouring Thailand, Singapore

Top Buys BBL, SCB, DBS; non-consensus Sell BCA: Staying positive on Thailand
despite rising political unrest. Underperforming Singapore banks may be buoyed
by strong 1Q10 GDP data (out April 14). Valuations suggest caution on Indonesia
despite solid fundamentals. Asean policy risk is largely benign, while GDP, loan
growth are likely to surprise on the upside. Event risks: politics, M&A and several
bank top management changes. Asean Banks Issues at a Glance, pages 3-5.

Thailand—Leveraging up: BoT’s upbeat outlook on GDP growth and recovery
suggests broadening loan growth and NIM expansion. Rising political unrest
becomes more critical only if parliamentary dissolution were to be forced before
Sept-Oct 2010, perceived as a critical date for the Army Chief nomination and
government's approval of the 2011, likely pro-private investment budget. Buy
ratings on BBL and consumer bank SCB, along with mid-caps BAY and TISCO.

Singapore—GDP surprise: Poor recent price performance should get a lift from
1Q2010 flash GDP data (out 14 April) likely to show strong double-digit YoY
growth. Upside risk to loan volumes but low interest rates pressuring NIMs. Rising
chance of MAS SGD NEER shifting to appreciation stance. DBS top pick.

Indonesia—Riding the liquidity wave: Indonesian banks near peak cycle valuations
but BI’s dovish stance promoting liquidity inflows. Strong 4Q09 NIMs boosted
earnings, but if BI system loan growth target of 20% not achieved more dramatic
policy measures could ensue. Buy Mandiri; non-consensus Sell on BCA.

Malaysia—Prefer bigger banks: Least upside of the Asean peers despite
broadening of loan growth and NIMs being lifted by the recent OPR hike. Upside
risk to fees/trade finance/investment banking income favours CIMB, Maybank and
mid-cap AMMB. AFG a small-cap idea for earnings turnaround, M&A play.