Corporate credit growth to improve this year – MARC
KUALA LUMPUR: Corporate credit growth for 2017 is expected to improve from last year, supported by the steady pace of economic progress and an improving outlook in key sectors of infrastructure and crude palm oil.
Malaysian Rating Corp Bhd (MARC) Chief Rating Officer Rajan Paramesran said the outlook for the oil and gas (O&G) and property sectors, however, remained challenging.
This, he added, is due to the sluggish pace of contract replenishment for O&G companies despite the rebound in crude oil prices in 2016.
"For the property sector, it remains affected by the affordability issue and tight bank lending guidelines.
"We also anticipate most Malaysian corporates to manage their debts in the near term.
"This follows recent measures undertaken by several major corporates, including asset monetisation, rights issues and corporate restructuring, which is expected to strengthen the company's balance sheet metrics," Rajan said. On banking, he said loan growth is expected to be sustained between five and six per cent this year, with credit demand driven mainly by the household segment.
However, relatively low loan growth, coupled with the continued margin compression and elevated impairment charges would weigh on the banks' earnings over the near term.
Rajan said the banking system's funding profile remained healthy, underpinned by the banks' good access to the capital market.
Meanwhile, on the ringgit's performance against the US dollar, Chief Economist Nor Zahidi Alias said the ringgit may improve between 4.0 to 4.2 this year, if global uncertainties are removed.
"This is because bond demands such as for Malaysian Government Securities is there.
"Although investors left Malaysia for a while, they are coming back as Malaysia is the second biggest bond market in the Asia Pacific, excluding Japan.
"Liquidity and infrastructure is there and the capital market can easily attract them to come to Malaysia," said Nor Zahidi.
However, he said the strengthening of the US dollar, the Brexit and possibly Frexit (France exiting the European Union) would continue to weigh on the ringgit, which is currently moving around the 4.4 to 4.5 level against the US dollar. — Bernama