Maybank IB: More capital market activity this year
CEO says corporates will be looking to strengthen their core businesses, which may involve acquisitions or divestments
PETALING JAYA: Capital market activities of “higher volumes” and “larger values” are expected this year on anticipation that the strong economic growth registered in the second half of 2017 will continue into this year, a banker said.
According to Maybank Investment Bank CEO Datuk John Chong, deal flow in the equity capital market will be propped up by a few large transactions which were delayed in 2017 as well as several new deals which include initial public offerings, equity placements and rights issues.
“Besides an increase in volume, deal values are also expected to be larger as compared to 2017,” Chong said, adding that the strong momentum of the stock market since the start of year was positive for equity capital raising.
The local stock market is starting the year on a relatively strong footing, amid continued recoveries in the ringgit and crude prices as well as a global rally.
Year-to-date, its benchmark index is up some 2% while the ringgit, primarily helped by a weaker US dollar, was at last look trading at an 18-month high of 3.9360 against the greenback.
Notably, at 3.9360, the ringgit is still far off from below the 3.50 level which is what some experts deem as fair value for the local unit.
“For mergers and acquisitions ( M&A), we expect the inbound and outbound M&A activities to sustain, led by not only government-linked investment companies but also the private sector,” Chong said.
Chong was speaking to Star Biz ahead of the 2-day Invest Malaysia conference that will start in Kuala Lumpur tomorrow.
According to him, this year will be a year that corporates will be looking to strengthen their core businesses, which may involve acquisition of targets in similar businesses or divestment of activities deemed non-core.
“There are attractive opportunities across all sectors but in particular consumer, real estate and infrastructure sectors,” Chong said.
In terms of the debt market, he anticipates that about RM 107 bil worth of government bonds and up to RM 100 bil worth of corporate bonds will be issued this year, following through from a strong performance in 2017.
These will be supported by the various funding requirements of current large infrastructure jobs such as the Pan Borneo Highway, East Coast Rail Link and the MRT and LRT projects.
“However, we are mindful of the potential interest rate hikes, both globally and domestically, which investors are expecting but the timing of which could potentially increase uncertainty and volatility, (which may then) affect the bond market.”
In its latest report on the outlook for the year, Maybank Investment Research said the impending 14th General Election (GE14) would be a major driver of investors’ sentiment in early 2018.
“Post-GE14, we expect the focus to return to basic fundamentals which are well supported. For equities, we estimate core earnings to grow 9.7% in 2018 for our research universe, and 5% for the FBM KLCI,” it told clients.
Externally, the research outfit is expecting global growth momentum to be sustained this year, growing by 3.6% – the same pace as last year – on the back of synchronised expansion of the G3 economies – the United States, Japan and the European Union – which will fuel world trade growth.
“This, in turn, is positive for Asean economies as we see spillover to domestic demand from export recovery,” it said.
Chong said as one of the leading economies in Asean, Malaysia has played – and should continue to play – a lead role to “harmonise rules, regulations and standards by sharing its technical expertise and experience here.”
“Among the areas Malaysia can lend its expertise (are in the areas of) the financing of SMEs and infrastructure; financial sector and capital market development,” he said.
Bursa Malaysia CEO Datuk Tajuddin Atan said Malaysia’s diversified and resilient economy today was the result of “far-sighted strategic policies put in place over the last 60 years”.
“Link that with the country’s international partnerships, strategic location and connectivity, it will place Malaysia in a favourable position to take advantage of the Asean growth story and firmly establish itself as the bedrock of Asean economic growth.”
Maybank and Bursa Malaysia are co-organisers of the Invest Malaysia conference.
The conference is expected to showcase 61 Malaysian companies, from large to mid-cap firms, with a combined market capitalisation of RM 767.6 bil.