RAM upgrades residential property sector to ‘stable’

KUALA LUMPUR: RAM Ratings Services Bhd has revised its outlook on the residential property sector for this year and next year, upgrading it to “stable” from “negative”.

This is based on the agency’s expectation of a slow but gradual pick-up in market activity after the lull of the last several years.

RAM also expects overall loan growth for the banking sector to remain flat at five to six per cent and Malaysia’s economic growth to remain steady at 5.2 per cent next year.

Sectors with a “stable” outlook include oil palm plantations, ports, power, telecommunications and toll roads.

The firm said despite the stability typically associated with the four infrastructure and utility sub-sectors, structural changes had begun taking place or had continued, signalling potential risks (or opportunities) over the medium to long term.

These include the push for renewable energy, the advent of new or alternate transportation infrastructure (toll roads) and increasing appetite for data consumption (telcos).

RAM reaffirmed its “positive” outlook on the construction sector, expecting it to keep being driven by a slew of contract awards, particularly mega infrastructure jobs.

In the first half, the sector sustained a 10.4 per cent year-onyear growth in terms of the value of construction work done, it said.

“We note that mortgage loan applications increased 15 per cent year-on-year in the first half, a promising sign of renewed interest, although credit availability and affordability will remain potential constraints to growth for this sector,” said RAM agribusiness, real estate and construction ratings head, Thong Mun Wai.

For the banking sector, RAM said competition for loans and deposits would be keen, leaving earnings under pressure although liquidity positions should remain intact, with all domestic banks’ liquidity coverage ratios exceeding 100 per cent.

“All in all, the Malaysian banking system is anticipated to remain sound, supported by stillhealthy asset quality and strong capital buffers. The latter is also expected to help Malaysian banks absorb the capital impact on the first day of MFRS 9 adoption next year.

“The resilience of the domestic economy also lends support to the ‘stable’ outlook on the banking sector.”

The firm said Malaysia’s real gross domestic product growth was projected to maintain a steady clip of 5.2 per cent next year, following the expected 5.4 per cent expansion this year.

“Despite the more upbeat overall economic outlook, we expect the operating environment for consumer-driven sectors to remain subdued or challenging in the near term. We have maintained the ‘negative’ outlook on retail, automotive, media and commercial property sectors.”

RAM also retained its “negative” outlook on oil and gas support services. Zarina Zakariah