Property transactions expected to increase

The recent relaxation of the FIC rules is expected to spur demand for residential and commercial property financing.

PETALING JAYA: Bank earnings and loans growth are likely to improve towards the end of the year, bolstered by the recent deregulation of the Foreign Investment Committee (FIC) guidelines on properties as well as easing conditions for new listings and fund-raising activities.

According to a foreign brokerage, property transactions, both residential and commercial, are expected to increase following the relaxation of the FIC rules, which should spur demand for property financing.

Higher property financing would lead to a turnaround in loans growth by year’s end or early next year, it said, noting that property financing comprised 36.4% of total loans in the banking system.

“The policy changes will create more revenue streams for Malaysia’s financial sector and reduce dependency on pure interest income,” the foreign research house said, adding that loans growth in May was underpinned by the relatively stable household loans segment, which grew 8.4% year-on-year.

In addition, the liberalisation would also encourage more mergers and acquisitions (M&As), as well as more capital and equity market activities, which would benefit investment banks, it said. With greater foreign ownership allowed in stockbrokers, product innovation – such as the roll-out of more varied derivative products – is likely to improve.

The foreign research house added that Malaysia’s capital market was expected to gain better access to capital and investments with the removal of the 30% bumiputra equity requirement, making it more attractive for foreign listings while supporting existing listed companies seeking to raise funds.

A local bank-backed brokerage said residential mortgages showed “no signs of weakening” as they sustained 10% growth from December 2008 to May 2009 despite the gloomy economic landscape.

This was due to progressive release of housing loans approved in the past one to two years, high savings rate of Malaysians, sustainable property transactions thanks to limited speculation, low interest rates and attractive schemes by developers, it said.

Moreover, there could be more corporate deals in the pipeline, including new listings and M&A transactions on the back of improved average daily trading value on Bursa Malaysia, it said.

This would augur well for investment banking income, including brokerage and corporate advisory fees, the research house added.

HwangDBS Vickers Research, meanwhile, said the liberalisation was “very bold measures” to improve the competitiveness of Malaysia’s properties internationally.

“The biggest winners will be developers with large exposure to the more ‘open’ districts like the Federal Territory and Penang, where the authorities would likely be supportive,” it said.

By The Star (by Yeow Pooi Ling)