This document summarizes the Malaysian government's recent liberalization measures for the country's financial services sector. Key points include: 1) Allowing up to 7 new licenses for foreign commercial and Islamic banks, with 4 in 2009 and 3 in 2011 that can be wholly foreign owned. 2) Increasing the foreign equity limit for domestic insurance, takaful, and investment banks to 70% from 49% previously. 3) Providing greater operational flexibility for foreign commercial banks, such as allowing microfinance branches and new regular branches. 4) The changes follow Malaysia's gradual "managed approach" to financial sector liberalization outlined in its 2001 Financial Sector Master Plan.

1. Equity Research
PP11072/03/2010 (023549)
Economics & Banking Update 28 April 2009
Financial services
liberalisation A ‘Small Bang’ approach…
Competition in financial sector to intensify gradually. Following the
Suhaimi Ilias liberalization of equity ownership requirements in 27 non-financial
Suhaimi_ilias@maybank-ib.com services areas last week, the Government announced liberalization
(603) 2297 8682 measures for the financial sector yesterday. The ‘gradualist’ approach
does not come as a surprise, as we enter the final phase of the
Financial Sector Master Plan which has laid out a road map for greater
Wong Chew Hann foreign participation by 2010.
wchewh@maybank-ib.com
(603) 2297 8686 Up to seven more foreign owned commercial/Islamic banks. The
liberalization measures encompass three areas, namely:
 up to seven new licenses for foreign commercial and Islamic banks
– four in 2009 and three in 2011, which may be 100% foreign
owned, and two more takaful operators;
 increase in foreign equity limits in domestic insurance/takaful,
investment banks and Islamic banks to 70% (from 49% previously);
 greater operational flexibility for locally-incorporated foreign
commercial banks, mainly in branch openings.
Existing domestic commercial banks’ foreign ownership limit of 30% is
unchanged. Details of the measures are summarized in page 2.
Generally, in line with the “managed” approach in the past, as
opposed to the “Big-Bang” approach. This fits in with the national
development agenda of enhancing contribution of the services sector
as a source of growth, employment, investment and trade, as well as
laying the foundations for the domestic financial services sector to take
advantage of the eventual recovery in the global economy and
investment flows.
Gives local banks “some time” before the “crunch” in 2011. On the
outset, the moves imply increased competition for the domestic
commercial banks. But this will not come immediately as the two new
commercial banking licenses in 2009 to foreign players are for
quot;specialized expertisequot;, relating to “industry-specific financing” like for
shipping, technology, infrastructure and agro-based. Also, greater
operational flexibility for foreign commercial banks for micro-financing
should not have an immediate material impact on the domestic banks.
In essence, the domestic commercial banks have a 1½ year time frame
to raise their competitiveness and efficiency before the opening of the
banking sector to three world-class commercial banks in 2011.
The liberalisation measures are LT positive in raising Malaysia’s
competitiveness in the financial services sector. We however,
maintain Underweight on the Banking sector. The immediate issues
are on asset quality, as the global and domestic economy head for a
slowdown. We stay concerned over rising NPLs and equity cash calls
to boost core capital (although not needed for now). The main risk is a
more severe and protracted economic downturn, with spikes in
unemployment (3.7% @ end-2008), and asset deflation.

2. Financial Services Sector Liberalisation
Banking Sector – Peer Valuation Summary
Stock Rec Shr px Mkt cap TP PER (x) PER (x) P/B (x) P/B (x) ROAE ROAE Gross Gross
(%) (%) yld yld
(RM) (RMm) (RM) CY09E CY10E FY09E FY10E CY09E CY10E FY09E FY10E
Maybank * NR 4.46 31,566 NR 12.2 13.0 1.1 1.1 8.8 8.5 5.6 5.6
BCHB Sell 8.00 28,625 5.40 15.0 14.3 1.5 1.4 10.6 10.4 2.3 2.3
Public Bank Sell 8.45 29,845 7.60 12.6 12.2 2.7 2.4 22.3 20.7 5.9 6.5
RHB Cap Hold # 4.10 8,829 3.60 10.3 9.7 1.1 1.0 10.6 10.5 3.7 3.7
AMMB Hold # 3.04 8,278 2.50 11.8 11.4 1.1 1.0 9.0 8.6 2.3 2.0
EON Cap FV 3.58 2,482 3.00 12.1 11.2 0.7 0.7 6.3 6.4 2.8 2.8
HL Bank * NR 5.65 8,928 NA 10.8 10.4 1.6 1.4 15.1 13.9 3.9 4.0
AFG * NR 2.05 3,174 NA 9.5 8.4 1.1 1.0 12.3 10.9 3.3 3.7
Affin Hldgs * NR 1.74 2,600 NA 11.6 10.1 0.6 0.5 5.4 5.6 2.8 2.7
Sector (weighted) 124,326 12.4 12.1 1.3 1.2
* Consensus; # Under Review; Source: Maybank-IB
Malaysia: Liberalisation of Financial Services
Areas Measures
 Up to 2 new Islamic banking licences in 2009 to foreign players with paid-up capital of at
Issuance of New Licences
least USD1b
 Up to 2 new commercial banking licences in 2009 to foreign players that will bring in
specialised expertise (e.g. in shipping, technology, infrastructure, agro-based, etc.)
 Up to 3 new commercial banking licences in 2011 to world-class banks that can offer
significant value propositions to Malaysia (BNM’s guidelines for world class banks include
Islamic banks with value propositions including “strengthening Malaysia’s position as an
international Islamic financial hub and as a shared services and outsourcing centre”)
 Up to 2 new family takaful licences in 2009
 Up to 70% foreign equity limits (from 49% previously) for:
Increase in Foreign Equity Limits
(i) existing domestic Islamic banks that wish to scale up their operations and expand
globally (these banks must maintain a paid-up capital of at least USD1b)
(ii) investment banks; and
(iii) insurance companies and takaful operators.
A higher foreign equity limit beyond 70% for insurance companies will be considered on a case-
by-case basis for those who can facilitate consolidation and rationalisation of the insurance
industry.
 Locally-incorporated foreign commercial banks can establish up to ten microfinance
Operational Flexibilities
branches to provide financial services to the underserved sectors of the economy;
 Locally-incorporated foreign commercial banks will be allowed to establish up to 4 new
branches in 2010 based on a distribution ratio of 1(market centre): 2(semi-urban): 1(non-
urban);
 Locally-incorporated foreign insurance companies and takaful operators are allowed to
establish branches nationwide without restriction;
 The restriction for locally-incorporated foreign insurance companies and takaful operators to
enter into bancassurance / bancatakaful arrangements with banking institutions is now lifted;
 Banks, insurance companies and takaful operators will be given greater flexibility to employ
specialist expatriates;
 Offshore banking institutions will be accorded flexibility to have a physical presence onshore
from 2010, and offshore insurance companies from 2011.
Source: BNM Press Release
Financial Sector Master Plan - Banking
The FSMP, drawn up in 2001, is a change programme over 8-10 years (by 2010) with the
objectives of improving efficiency, innovation, flexibility, resilience and dynamism in the banking
system. The programme has been implemented over three stages with the following objectives:
 Phase 1 – To develop a core set of strong domestic banking institutions. Therefore, initial
steps shall focus on measures to strengthen the capability and capacity of domestic
banking institutions, create an environment where the best domestic banking institutions
emerge, and building and enhancing the financial infrastructure.
 Phase 2 – To increasingly level the playing field for incumbent foreign players. This will
add further competition to the industry, and provide wider choices for the consumers.
 Phase 3 – To introduce foreign competition. In addition, there will be expansion of
domestic banking institutions to foreign markets.
Source: FMSP
28 April 2009 Page 2 of 4

3. Financial Services Sector Liberalisation
List of Banking Institutions in Malaysia, Feb ‘09
COMMERCIAL BANKS INVESTMENT BANKS
Domestic Commercial Domestic IB
1. Affin Bank Berhad 1. Affin Investment Bank Berhad
2. Alliance Bank Malaysia Berhad 2. Alliance Investment Bank Berhad
3. AmBank (M) Berhad 3. AmInvestment Bank Berhad
4. CIMB Bank Berhad 4. Maybank Investment Bank Berhad
5. EON Bank Berhad 5. CIMB Investment Bank Berhad
6. Hong Leong Bank Berhad 6. Hwang-DBS Investment Bank Berhad
7. Malayan Banking Berhad 7. KAF Investment Bank Berhad
8. Public Bank Berhad 8. Kenanga Investment Bank Berhad
9. RHB Bank Berhad 9. MIDF Amanah Investment Bank Berhad
Domestic Islamic 10. MIMB Investment Bank Berhad
1. Affin Islamic Bank Berhad 11. OSK Investment Bank Berhad
2. Alliance Islamic Bank Berhad 12. Public Investment Bank Berhad
3. AmIslamic Bank Berhad 13. RHB Investment Bank Berhad
4. Bank Islam Malaysia Berhad 14. Hong Leong Investment Bank Berhad
5. Bank Muamalat Malaysia Berhad 15. ECM Libra Investment Bank Berhad
6. CIMB Islamic Bank Berhad
7. EONCAP Islamic Bank Berhad
8. Hong Leong Islamic Bank Berhad
9. Maybank Islamic Berhad
10. Public Islamic Bank Berhad
11. RHB ISLAMIC Bank Berhad
Foreign Commercial
1. The Royal Bank of Scotland Berhad
2. Bangkok Bank Berhad
3. Bank of America Malaysia Berhad
4. Bank of China (Malaysia) Berhad
5. Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad
6. Citibank Berhad
7. Deutsche Bank (Malaysia) Berhad
8. HSBC Bank Malaysia Berhad
9. J.P. Morgan Chase Bank Berhad
10. OCBC Bank (Malaysia) Berhad
11. Standard Chartered Bank Malaysia Berhad
12. The Bank of Nova Scotia Berhad
13. United Overseas Bank (Malaysia) Berhad
Foreign Islamic
1. Al Rajhi Banking & Investment Corporation (Malaysia) Berhad
2. Asian Finance Bank Berhad
3. Kuwait Finance House (Malaysia) Berhad
4. HSBC Amanah Malaysia Berhad
5. OCBC Al-Amin Bank Berhad
6. Standard Chartered Saadiq Berhad
Source: BNM
28 April 2009 Page 3 of 4

4. Financial Services Sector Liberalisation
Definition of Ratings
Maybank Investment Bank Research uses the following rating system:
STRONG BUY Total return is expected to exceed 20% in the next 12 months; high conviction call
BUY Total return is expected to be above 10% in the next 12 months
HOLD Total return is expected to be between above 0% to 10% in the next 12 months
FULLY VALUED Total return is expected to be between -10% and 0% in the next 12 months
SELL Total return is expected to be below -10% in the next 12 months
TRADING BUY Total return is expected to be between 10-20% in the next 6 months arising from positive newsflow e.g. mergers and
acquisition, corporate restructuring, and potential of obtaining new projects. However, the upside may or may not be
sustainable
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are
only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not
carry investment ratings as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings
BV = Book Value FV = Fair Value PEG = PE Ratio To Growth
CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio
Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter
CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset
DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity
DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds
EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital
EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year
EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date
EV = Enterprise Value PBT = Profit Before Tax
Disclaimer
This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation
of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each
security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental
ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on
price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may
receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to
provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the
particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding
the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently
verified by Maybank Investment Bank Bhd and consequently no representation is made as to the accuracy or completeness of this report by
Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or
consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Bhd, its affiliates and
related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be
materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting
commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services
for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time,
without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”,
“believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”,
“should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions
made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ
materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-
looking statements. Maybank Investment Bank Bhd expressly disclaims any obligation to update or revise any such forward looking
statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated
events.
This report is prepared for the use of Maybank Investment Bank Bhd's clients and may not be reproduced, altered in any way, transmitted to,
copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank
Investment Bank Bhd and Maybank Investment Bank Bhd accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
Published / Printed by
Maybank Investment Bank Berhad (15938-H)
(Formerly known as Aseambankers Malaysia Berhad)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur
Tel: (603) 2059 1888; Fax: (603) 2078 4194
Stockbroking Business:
Level 8, MaybanLife Tower, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur
Tel: (603) 2297 8888; Fax: (603) 2282 5136
http://www.maybank-ib.com
28 April 2009 Page 4 of 4