Thursday , October 28 2021

Economists say markets in rating agencies have lost faith


The downgrade of the Fitch rating means that it will become more expensive for Malaysia to borrow. (Reuters image)

KUALA LUMPUR: Two economists have given a mixed view of the latest revision of Fitch Ratings in Malaysia’s sovereign rating, one disappointing and the other expected to change over time.

Juan IQI Chief Economist Shaun Saeed criticized the rating agency for assessing Malaysia’s sovereign rating, saying markets have lost confidence in rating agencies since 2010.

“Their reports and views are behind the curve. They are presenting non-German trivial analyzes in the market, ”he told Bernama.

Markets Macroeconomic stability, finance and monetary policy leverage to drive strategies and stimulate growth Above all, the overall economy (GDP) calculus leads to all economies.

Fitch announced last Friday that it was downgrading Malaysia’s sovereign rating from A to BBB +, with an improved outlook from negative to stable.

Depreciation means that borrowing from Malaysia will become more expensive, which will have a financial impact.

Shawn said the agency was concerned about the domestic political situation, saying that since March 23, the ringgit has been 8.55 per cent and inflation has been below 1.5 per cent, and the budget deficit is within single digits despite the change in government.

The debt-to-GDP ratio is about 60% and overall demand is very structured.

He said the real estate market was still booming and sales of those luxury cars were up 3-5 per cent from a quarter to a quarter, adding that energy demand, especially from liquefied natural gas (LNG), was coming from Asia. Malaysia is the world’s third largest LNG exporter.

“The Malaysian government is doing its utmost to focus on people-centered policies and growth-oriented economic strategy,” he said.

At the same time, Bank Islam Malaysia’s chief economist said the announcement was not surprising given the size of the stimulus package. Muhammad Afzanism Abdul Rashid said.

He said rating agencies are in the business of providing credit comments, which tend to change as new information and development develop, and the focus now should be on ensuring that the financial recovery process continues.

“If we do it right, we can raise the sovereign rating at some point in the future,” he said.

He said the ringgit and Malaysian government securities revenue would respond tomorrow following the review.

However, there are large domestic institutional funds in Malaysia such as Employees Provident Fund, Retirement Fund Incorporated, banking institutions, insurance companies, Bank Negara Malaysia and asset managers, which will act as shock absorbers for potential sales, he said.

Regarding Fitch’s review time, Afzanism said it was entirely at its discretion because Fitch had indicated in April that the rating outlook had been changed from “stable” to “negative”.

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