Bank earnings a reality check for stock markets

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It's liquidity that is keeping the stock markets afloat. Not the real economy.

Market push: A trader walks past a screen at the New York Stock Exchange. The liquidity gush that is keeping markets afloat stems from the stimulus package led by the US. — AFPNo amount of bad news – from rising unemployment to supply chain disruptions and rising tensions between the US and China – has had any impact on the stock market so far. Usually, in the month of May, fund managers sell off their positions and go for their summer break.

One only needs to scrutinise the results of banks to understand how bad the next few months would be before things improve. Banks are concerned on the impact to their bottom line, especially after September when people have to start servicing their loans again after a six-month moratorium. As rightly put by Maybank president and group chief executive Datuk Farid Abdul Farid Alias, the first quarter results were not representative of the way the bank will perform for the rest of the year. He expects the operating environment to be difficult.

Like Maybank and Public Bank, CIMB also expects operating conditions to be challenging and an increase in provisions for loans to businesses. Thailand and Indonesia did not offer any moratorium on loans. However, both countries announced measures such as tax cuts to help businesses. Indonesia’s package also went towards assisting the poor and lower income groups.

 

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