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CIMB Group expects GDP 4.6% in 2016

CIMB Group expects GDP 4.6% in 2016

KUALA LUMPUR: CIMB Group expects Malaysia’s real gross domestic product (GDP) growth to be slightly slower at 4.6% in 2016.

The operating environment will continue to be tough in the first half of next year and the impact of rising costs of living, ringgit weakness, rising job losses and tighter credit will all lead to consumer spending staying weak.

However, fixed investment was expected to pick up as the new five-year 11th Malaysia Plan kicked off, and it would help offset some of the lost momentum in consumer spending to ensure sustained strength in domestic demand, its group chief executive, Tengku Datuk Seri Zafrul Aziz said in a statement today.

On the banking sector outlook, he said Malaysian banks would generally be stable in 2016.

“We forecast a net profit growth of 11.2%, on the back of our forecasts of a 6.9% rise in net interest income and 9.5% increase in non-interest income.

“We agree with Fitch Ratings that there are pressures on the banks’ asset quality, and therefore expect impaired loan ratios to rise in 2016 but the  increase would not be significant,” he said.

On merger and acquisition (M&A) deals outlook in 2016, CIMB Group foresees much of Malaysia’s 2016 investment deals to be supported by private sector outlays in the manufacturing and services sector, as well as public infrastructure-related spending.

“As such, we are optimistic on the Malaysian bond market in 2016, which will potentially surpass 2015 in terms of sukuk sales, as we are projecting RM70 billion to RM75 billion of corporate bonds issuances in 2016, out of which sukuk historically makes up about 70-80% of the annual issuances,” Tengku Zafrul said.

Several infrastructure projects including roads and railways worth at least RM75 billion to RM80 billion deferred in 2015 are likely to be launched in 2016 in the government’s effort to sustain economic growth.

Due to the US Federal Reserve’s rate hike, the banking group also expects renewed interest in initial public offerings and raising of capital in Malaysia, particularly for export-oriented companies that would benefit from a stronger US dollar.

“We also expect more activities on the M&A front, particularly in the insurance, electronics, property and telecommunication industries, as companies look to consolidate or strengthen their market positions,” Tengku Zafrul said. – Bernama, December 31, 2015.