Malaysia - Moody’s: Outlook for Malaysia’s A3 rating stable

 KUALA LUMPUR: Moody's Investors Service said the outlook for Malaysia's A3 sovereign rating is stable and it has the buffers against global financial pressures.

The international ratings agency said yesterday that Malaysia's rating was underpinned by resilient growth, a strong external position, and deep and liquid domestic capital markets that assured favourable financing conditions.

“The stable outlook is supported by recent trends in economic performance, as well as the initial gains from the Government's efforts at structural reform.”

It said the country's financial system and strong corporate sector contributed to its net international investment surplus. Moody's highlighted that these advantages had ensured the “finance-ability” and “affordability” of Malaysia's large fiscal deficits and higher government debt relative to its peers. The international ratings agency pointed out Malaysia's credit profile would be further enhanced by fiscal reforms that addressed weaknesses in both revenues and expenditures.

“We also expect political pressures due to the impending parliamentary elections to be reasonably managed.” In its report, it noted the trade channel as the likely source of transmission of the euro area crisis to Malaysia's economy. However, it expected the sound and liquid position of Malaysia's banking system to mute the contagion risk from the financial channel, should euro area banks deleverage.

“Also, capital market depth and the large buffer of foreign exchange reserves guard against a disruptive reversal of non-resident accumulation of Malaysian Government debt,” it added.

Meanwhile, Reuters reported that Standard & Poor's Ratings Services (S&P) had raised its Asean regional scale rating on Malaysia to axAAA/axA-1+ from axAA+/axA-1. It has also affirmed its global scale ratings on Malaysia (foreign currency A-/Stable/A-2; local currency A/Stable/A-1).

In addition, the ratings agency raised its long-term Asean scale rating on Petroliam Nasional Bhd to axAAA from axAA+.

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