Fitch on Malaysia: Stable outlook, still at A- (Investment Grade)

Reported in many different medias few days ago was about Fitch Rating’s affirmation of Malaysia’s long-term foreign- and local-currency issuer default ratings (IDRs) at ‘A-’ with stable outlook, reflecting the country’s strong net external creditor position. Nope, this was definitely not widely shared. Perhaps it’s because of Malaysia’s badminton team in Olympics. (Great performances by the way and I watched every game) Fitch also said that the real gross domestic product (GDP) growth is stronger than the median of ‘A’ rated peers and this is supported by the surplus in trade account even if this continues to narrow. 

Fitch has also affirmed Malaysia’s senior unsecured foreign- and local-currency bonds at ‘A-’ and ‘F1’, while the short-term local-currency IDR at F1.

Meaning of A-? Please read below then:

Investment grade

  • AAA  : the best quality companies, reliable and stable
  • AA  : quality companies, a bit higher risk than AAA
  • A  : economic situation can affect finance
  • BBB  : medium class companies, which are satisfactory at the moment

Short-term local-currency IDR at F1. What does F1 mean? Please read the below then.

  • F1  : best quality grade, indicating strong capacity of obligor to meet its financial commitment

Fitch expects Malaysia’s real GDP growth to be 4 percent in 2016. The supporting factors for the growth include private consumption demand and continued spending on strategic projects by the government and state-owned enterprises. This will have to defend against the weak external demand. Fitch also said something really important for a longer term outlook. Fiscal consolidation had supported stabilisation in the federal government debt and deficit ratios. Yes, this is still happening despite the slowing growth which has made it even harder to stay the course. 

Yes, I think recession will not be started by Malaysia but some more advanced countries around the world or perhaps a few of them, potentially. If recession happened to start from Singapore, then yes the effects will be pretty significant to Malaysia. Happy following and believing.

Full understanding of all the different ratings from Fitch? Take a look here: Fitch Ratings by Wikipedia 

written on 21 Aug 2016

Next suggested article:   Recession in 2018 for Malaysia, most sectors down

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