The Malaysian capital markets may be impacted by global liquidity flows emanating from the monetary policy stance of major economies, said the Securities Commission Malaysia (SC).

“Notwithstanding that, coupled with local institutional investors, the market is resourced with ample domestic liquidity to countervail any excessive volatility,” the SC said in its 2014 annual report released on March 5.

The SC said the resetting of the FBM KLCI, or Bursa Malaysia’s valuation to its long-term average at end-2014, together with the relative appreciation of other currencies vis-à-vis the ringgit, may lend further support to the attractiveness of the Malaysian market.

On the bond market front, the SC said yields are likely to respond to upward pressures arising from the prospective normalisation of US interest rates. “This may alleviate any adverse impact from any sell-off by investors and may even attract new fund flows into the capital markets,” it said in the report.

The SC also said fundraising activity in relation to several large Economic Transformation Programme-related projects is expected to be carried out this year and will contribute to the growth of the capital markets. The infrastructure and oil and gas sectors are likely to source lon- term financing through sukuk and corporate bonds.

“In view of these factors and reflecting the Malaysian economy’s diversity, long-term fundamentals and prudent macroeconomic management, the capital markets are expected to continue recording positive growth and remain resilient [in the face of] any externally driven volatility in the markets,” the SC said in the report.

According to the SC, emerging economies, led by subdued economic growth in China, will continue to be the key drivers of world growth, supported by the stronger momentum from the recovery in the advanced economies.