Reported in Bloomberg, Fitch Ratings reiterated its earlier stand; that Malaysia’s credit rating should drop and the likelihood is higher than 50 percent. Its head of Asia Pacific Andrew Colquhoun was quoted as saying that Malaysia is more suited to be in the BBB range. Major reason remain the same, 1MDB’s ability to meet debt obligations. Thus, due to 1MDB, it will affect Malaysia’s credit rating. Currently, Malaysia is still rated at A- by Fitch. The decision would be made next quarter. This may mean as early as July 2015. For the record, Fitch has assigned a Negative outlook to Malaysia since July 2013 and thus far this has been maintained.
As of now, Fitch’s assessment remain different from that of Moody’s Investors Service and Standard & Poor’s (S&P). Moody’s affirmed its A3 rating and positive outlook in January. It also said that its decision is supported by Malaysia’s macroeconomic stability and the current fiscal deficit steps by the government. Meanwhile, S&P maintained its A- rank and stable view in February and said that Malaysia’s economy has no issues to withstand some weakness in energy sector.
Do note that all these ratings would have implications on how investors see / invest in Malaysia. Once the rating is down, the investors tend to also look elsewhere and this would most probably cause more weakness to the Ringgit. My personal opinion remains the same, 1MDB is a weakness to some important people and is a good political topic but it should not be used as a rating reason when compared to the current economy of Malaysia where all indicators remain positive. Of course, I am just a very normal Malaysian and my views would remain just my views. Be reminded, if you personally feel that the Malaysian economy is not going to do well very soon, please start to keep cash and not pouring more money into property. There’s no reason to get trapped when things suddenly turn for the worse.
written on 22 May 2015
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