Capital market geared to support economic growth in 2017

KUALA LUMPUR: Malaysia’s capital market is expected to be positive this year and will continue to play a major role in supporting the country’s growth through financing of business expansion and infrastructure development.

The Securities Commission Malaysia (SC), in its Annual Report 2016 released yesterday, said the total capital raising through primary and secondary markets is expected to improve in 2017 to around RM102 billion RM105 billion, compared with RM98.5 billion last year.

“Fund-raising through the corporate bond and sukuk market in 2017 is expected to approximate the sum raised in 2016 and amount to about RM85 billion,” it said.

The SC said equity fund-raising is expected to be higher in 2017, and it is expected that approximately RM7 billion-RM9 billion will be raised via initial public offerings (2016: RM1.0 billion) while RM10 billion-RM11 billion will be raised through the secondary market (2016: RM11.8 billion).

The positive outlook for Malaysia’s capital market with growth expected across key market segments is underpinned by higher levels of corporate activity within a backdrop of sound economic fundamentals in place to support a consistent growth outlook, it said.

Against prevailing global uncertainties, the SC said, the low beta nature of the equity market, coupled with better dividend yields relative to regional peers, represents an attractive portfolio diversification opportunity.

Meanwhile, it said, earnings growth is expected to regain a positive momentum in 2017, in line with the roll-out of more infrastructure projects, better economic fundamentals such as an improving fiscal deficit and current account surplus as well as improving liquefied natural gas prices in tandem with higher crude oil prices.

“In particular, market consensus is positive for the oil and gas segment, plantation as well as construction sectors,” it said.

It said foreign shareholding in the equity market is at present in line with its long-term averages, with expectations of some inflows, assuming clarity in the global policy environment and an improvement in emerging market interest on the part of global investors.

The bond market, on the other hand, may see some fund outflows in line with the overall performance of global emerging market bonds given external factors but it should be mitigated by sound domestic economic fundamentals and domestic liquidity, it said.

The SC said despite having relatively high levels of foreign ownership, the profile of a majority of investors in the bond market suggests holdings are by long-term investors and should provide stability to foreign ownership levels.