KUALA LUMPUR (March 4): Banking stocks like CIMB Group Holdings Bhd and Hong Leong Financial Group Bhd were among top gainers on foreign buying in anticipation of further cuts in Bank Negara Malaysia's statutory reserve requirement (SRR).

Analysts said an SRR cut would increase liquidity in the market. CIMB rose 11 sen or 2.4% to RM4.61 at 3.43pm while Hong Leong Financial increased 12 sen or 0.8% to RM14.40 at 3.44pm.

Bank Negara will issue its next monetary policy statement on March 9.

On Jan 21 this year, Bank Negara said in a statement it had maintained the overnight policy rate at 3.25%. In a separate statement on the same day, Bank Negara announced a cut in the SRR for banks here to 3.5% from 4%.

Today, Inter-Pacific Securities Sdn Bhd research head Pong Teng Siew told theedgemarkets.com that "foreign funds have been consistently buying into banking stocks as further (SRR) rate cuts are expected, which works well for bringing back liquidity into the local market".

"Funds have been gradually buying more since the cut, and the pace is seen to be increasing now," Pong said.

Pong also noted weaker US economic data, which might slow the pace of US interest rate rise.

Such sentiment could have an impact on the ringgit-US dollar exchange rate, according to him.

"This signals a weakening in the US dollar, which in turn means the ringgit may strengthen, which could support increases in the KLCI. Following this, foreign funds are re-entering the market through the KLCI component stocks.

"These funds are buying into banking stocks as well, considering the weightage these stocks have on the index," he said.

According to Bloomberg data, the ringgit strengthened to 4.1322 against the US dollar at 4.07pm.

The ringgit could have also tracked crude oil price gains as the commodity forms a crucial component of the Malaysian economy and government revenue.

Reuters reported that crude futures rose in Asian trade on Friday, buoyed by renewed optimism prices may have bottomed out after official US data showed oil production fell to its lowest level since November 2014.

Brent futures had risen 18 US cents to US$37.25 a barrel as of 0753 GMT, after settling 14 US cents higher in the previous session. The crude benchmark is set to end the week with a gain of more than 5%.