Somehow, the ‘heavy rain’ has also created some rainbows here and there. Moody’s Investor’s Service said that the depreciation of Ringgit of about 11% (yes recovered slightly on 4th Feb 2015) will not affect Malaysia’s sovereign rating much. The reason is because 97% of the government’s debt is denominated in Ringgit. Quite a clever government in this case, even if there are many things which many would not agree. The one who said it? It’s vice president-senior analyst of Sovereign Risk Group Christian de Guzman. He said that countries such as Indonesia or the Philippines would have much higher exposure as their exposure is 40%. (very high indeed). He also said that despite current uncertainties, Malaysia’s economy is expected to continue to be positive, with low inflation and even a robust external payments positions compared to other A-rated countries. Note, we are compared to other A-rated countries, even as at today, 5th February 2015.
Of course, there are also negatives, especially the high household debt which some reports said may cause more headwinds in future. The most awesome comment is this: As long as fiscal deficit and debt burden continues to reduce, we may even have an upgrade in ratings. Last but not least, he said that Malaysian banks are among the top-five highest rated banking systems in Asia Pacific and second in Asean.
Sometimes we may not understand a lot about all these ratings but always remember that for any investors who know next to nothing from a far away place to invest here in Asia, they have to rely on all these ratings to help them in deciding. Honestly, even if you are buying properties, would you want to buy in a country where the economy is weak and the ratings are below investment grade? This has always been the main reason why when properties come into mind for ASEAN, the first country is Singapore. Strong surplus position, robust economy as well as an open business environment meant that it’s always a favourite of many. Note: The more it goes up, the more it may also drop. The luxury properties in Singapore has also dropped a lot in 2014 and is expected to be weak in 2015 too. Would the property market be a ‘darling’ again? Without any doubt, yes but under current negative condition, no.
Property investment is not just about how the property is doing. Understanding a little more meant that you make better decisions. Even if I were to buy into other countries 10 years from now, I would also rely on these ratings as a main consideration. It is tough to only listen to my friends because many times, only those who were successful would tell you their stories while many others who were not would just keep quiet. Agree? Happy reading and understanding.
written on 5th Feb 2015
Next suggested article: First Property? Some considerations.