RAM expects rating actions to remain downside biased this year

KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) expects overall rating actions to remain downward biased in 2018, given the more numerous issuers on a negative outlook relative to a positive one.

In a statement yesterday, the rating agency said as at end-2017, the ratings of 14 entities either had a negative outlook or had been placed on Rating Watch, as opposed to four issuers with a positive outlook.

However, the severity of forward rating actions is expected to be maintained or improved, backed by healthy economic growth, resilient corporate credit quality and still-accommodative interest rates, it added. RAM Ratings has released the 20th instalment of its annual Corporate Default and Rating Transition Study, which covers a total of 589 corporations and financial institutions that it rated between 1992 and 2017.

On the whole, it said rating actions were still negatively biased last year, as downgrades exceeded upgrades with 10 issuers (out of 180 rated entities as at Jan 1, 2017) having their ratings downgraded.

Of these, three were from the media sector, on which RAM Ratings has a negative outlook due to its weaker prospects.

It said the downgrades-to-upgrades ratio, however, eased to 2.0 times in 2017 (2016: 2.7 times)

amid the higher number of rating upgrades relative to 2016.

Concurrently, the magnitude of downgrades remained relatively unchanged, averaging 1.5 rating

notches ( 2016: 1.3 notches), which is below the long- term average of 2.1 rating notches, it added.

The agency noted there were no defaults during the year.

However, as at end-December 2017, the cumulative number of defaults stood at 51, with a combined rated programme value of RM13.2 billion.

Head of Data Analytics Julie Ng said despite still downward-biased rating actions, the overall credit quality of RAM’s rated portfolio was expected to remain intact

“As at end-2017, some 82 per cent of the portfolio (by programme value) or 137 out of 180 issuers carried at least AA ratings. — Bernama