Foreign funds would always try to invest in markets which are worth investing in. In brief, countries which are rated under the ‘Investment Grade’ by the international rating agencies. This is why when a country is downgraded by an international rating agency, the foreign funds would be withdrawing their investments soon after or even before if they got some earlier warning signs. The three major rating agencies? Fitch Ratings, Standard & Poors and Moody’s. So they do yield tremendous powers and well, authority. Where is Malaysia with regards to our sovereign rating? Here’s one recent announcement by Moody’s.
Moody’s Investors Service vice-president and senior analyst for Sovereign Risk Group, Anushka Shah says that Malaysia’s growth performance is likely to remain healthy in 2018, which is reflected in the country’s credit rating. She shared that Malaysia with an A3 credit profile, was among the fastest-growing A-rated sovereigns. Here’s the article in NST. The economic growth will however slow in 2019. She says that Malaysia has an environment of trade uncertainty, and this could weigh on growth prospects going forward. Nevertheless, she said, “But we do think that the potential performance remains relatively strong.” Anushka said that Malaysia’s trade flow was strong in 2017 with export growth outperforming other regional peers, thus providing some buffer to the current account.
Debt is where Malaysia is showing some weakness. She said that this is a key credit constraint to the rating. She added, “Despite several consecutive years of deficit consolidation, (Malaysia’s) debt burden is significantly higher than the median for A-rated sovereigns.” Here’s that article in NST for reference: Malaysia’s growth to stay healthy in 2018: Moody’s. By the way, Malaysia is also rated under investment grade by both Fitch Ratings as well as Standard & Poors. Singapore is rated under Aaa which is the highest rating possible. Indonesia is under Baa2. Thailand is Baa1. China, the second largest economy in the world is rated A1 which is below Singapore and above Malaysia. I am not an economist, so will not comment on the rating. By the way, the U.S. is rated at Aaa too! 🙂 Happy understanding and yes, keep buying those undervalued stocks.
written on 21 Sept 2018
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