Wednesday, July 1, 2015
Najib: Fitch upgrade a reflection of Govt's economic policies
“I am pleased that Fitch, the international ratings agency, has maintained Malaysia’s credit rating and revised our outlook upwards to stable.
“In view of the many uncertainties in the external sector, the newly-announced ratings are indeed a reflection of our Government’s financial management and economic policies,” the Prime Minister said in a a Facebook post on Wednesday.
The ratings agency had maintained Malaysia’s long-term foreign currency default rating (IDR) at A- and local currency at A, with the outlook revised to Stable from Negative previously.
It said Malaysia’s fiscal finances have improved and that it views progress on the GST and fuel subsidy reform as supportive of the fiscal finances.
In July 2013, Fitch had attached a “negative” outlook to Malaysia and suggested earlier this year that there was a 50% chance of a downgrade in the rating.
MIDF Economic Research expects Fitch Ratings’ move to revise the outlook on Malaysia’s sovereign rating to “stable” from “negative” to boost the ringgit.
The international ratings agency had also affirmed Malaysia’s long-term foreign currency Issuer Default Rating (IDR) at 'A-', with local currency IDR at 'A'.
MIDF Research said the review is in sharp contrast to the market's expectation of a downgrade by as much as two notches on Malaysia’s credit rating, following its earlier remark in March on such a possibility because of worsening trade balance and a state investment company's struggles to meet its debt obligations.
“Fear of the downgrade has dampened the equity market sentiment and sent the ringgit to near 10-year low earlier this week,” it said.
MIDF Research said this is positive for Ringgit which it had highlighted earlier as the only supporting factor for Ringgit in the near-term although “we have not been anticipating any downgrade from the rating agency”.
“The move to upgrade our outlook from “Negative” to “Stable” is a bonus factor. The USD/MYR has recovered slightly by 0.9% to 3.773 , erasing fears of the currency tanking further to hit the 3.80 psychological level.
“Nonetheless, we believe that the room for further upside is still limited given that the sentiments across the emerging markets sphere is still negative. We maintain our view that Ringgit will close the year at 3.70 – 3.75,” it said.