KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) expects corporate credit outlook to be stable with some moderate downside risks this year.
MARC chief economist Nor Zahidi Alias said the stable outlook is supported by the steady pace of economic growth that would support growing business and consumer sentiments and the expectations that price recovery of key commodities would hold within ranges that are higher than recent lows.
The outlook also considers the beneficial spillover from a spate of infrastructure projects to construction and construction-related companies.
“MARC expects corporates in general to record positive earnings growth in 2018, while corporate leverage is expected to remain at a moderate level,” he said at a briefing here today.
MARC also noted that the growth in borrowings had tapered in 2017 and the trend is likely to persist this year.
Meanwhile, Zahidi said MARC views the outlook on most sectors to be stable.
The rating agency considers the stable outlook on the construction sector to be supported by ongoing and planned government-initiated large projects.
It expects crude palm oil (CPO) price to be range bound between RM2,400 per tonne and RM2,600 per tonne in 2018, with the steady increase in CPO production volume to weigh on price on the upside.
Zahidi said among the few sectors for which the outlook will continue to be challenging is property, which will be characterised by slow sales, particularly in the high-end segment.
“The rating agency views that the residential property overhang could worsen in the near term although pace of inventory build-up has slowed in the recent year.
“This is on the back of fewer property launches and the targeting of more medium-cost developments where the demand has been resilient,” he said.
Zahidi said in the office and retail segments, as supply continues to outstrip demand, both occupancy levels and rental rates have come under increasing pressure.
“The improving operating environment for oil and gas companies on the back of oil price recovery has come as respite, although the lower value and shorter tenure of contracts being awarded provide limited earnings visibility for some players in the upstream segment,” he said.