KUALA LUMPUR: The FBM KLCI rallied in early trade on Friday, March 5, fuelled by gains in Public Bank and CIMB after OSK Research maintained its Overweight on the sector.

OSK Research said the gradual normalisation in interest rates will be positive for banks margins and have little impact on loans growth and non-performing loans (NPLs).

At 9.04am, the FBM KLCI rose 11.7 points to 1,295.79. Turnover was 16.75 million shares valued at RM12.82 million.

Hwang DBS Vickers Research said despite Bank Negara Malaysia’s decision to up the overnight policy rate by 25 basis points to 2.25%, selected banks with a higher proportion of variable rate loans could benefit from the interest rate hike as deposit rates tend to lag lending rates.

“Conversely, sentiment on property counters may suffer from rising mortgage rates although the broad demand should remain supported by an improving economic outlook.

“In a sense, the policymakers’ move to raise interest rates sooner rather than later is a reflection of their confidence on the strength and sustainability of our economic growth momentum after seeing a year-on-year jump of 4.5% in GDP in 4Q09,” Hwang DBS Vickers Research said.

Public Bank and CIMB rose 16 sen each to RM11.38 and RM13.74.

Nestle was the top gainer, adding RM1.24 to RM35.54, BAT advanced 62 sen to RM43.12, DiGi 30 sen higher at RM22.30 and Tanjong 22 sen to RM17.96 while Sime Darby added 12 sen to RM8.65.