KUALA LUMPUR (March 9): Malaysia's economic growth is expected to remain steady at 4% to 5% in 2017, driven by sustained private domestic demand and exports, which is supported by the recovery on commodity prices, according to the Securities Commission Malaysia (SC).

In its Annual Report 2016, the SC said the government's commitment to enhance revenue and curb expenditure to trim the national fiscal deficit augurs well for the country's economic fundamentals in the long run, thereby further boosting investor sentiment.

The report pointed out that the current weak ringgit, which is perceived as being undervalued, presents an opportunity for foreign investment in the local stock market.

"With the overnight policy rate (OPR) cut in July 2016, financial conditions remain accommodative to support growth and ensure sufficient liquidity," it added.

The commission added that based on its current assessments, it estimates that total capital raising through primary and secondary markets will improve to around RM102 billion to RM105 billion in 2017, compared with a total of funds raised in 2016 of RM98.5 billion through the capital market.

"Domestic fundraising is expected to be mainly driven by capital raising in the corporate bond and sukuk market for infrastructure financing as well as refinancing of bonds and sukuk," said the report.

The SC expects equity fundraising to be higher in 2017, with RM7 billion to RM9 billion being raised through initial public offerings while RM10 billion to RM11 billion will be raised through the secondary market.

The annual report also noted that earnings growth is expected to regain positive momentum in 2017, in line with the roll-out of more infrastructure projects and 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.

The outlook for the crude oil market remains bright in the first half of 2017, with demand likely seeing a continual rise while production will be reduced amid Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC nations agreeing to a production cut from January, according to the report.

It, however, said long-term uncertainty persists in the world energy markets as the production cut was only agreed for a short-term period of six months, to be reviewed in May 2017.

Market consensus is also positive for the oil and gas, plantations, and construction sectors in 2017, adding that crude palm oil prices will continue their upwards trajectory in 2017.

"The capital market will continue to remain resilient with strong fundamentals in place and significant pools of domestic institutional liquidity. Underpinned by a robust regulatory architecture and strong market infrastructure, the Malaysian capital market will provide long-term value and growth potential for all participants," said the report.

On the bond market, the commission added that despite having relatively high levels of foreign ownership, the profile of the majority of the investors suggests holdings are by long-term investors and thus should provide stability to foreign ownership levels.