Credit worthiness of RAM-rated firm to be stable

PETALING JAYA: The credit worthiness of companies rated by RAM Holdings Bhd is expected to be stable on the improving economic outlook.

RAM said in a default study on the first-half of the year that companies in its rated portfolio would not see any significant deterioration in credit quality since the majority of them were rated high-grade with sufficient access to refinancing and other forms of flexibility.

“Given the prospects of a stronger-than-expected economic recovery and amid resilient corporate credit health supported by accommodative interest rates, we expect forward rating actions to show less negative bias and defaults, if any, to remain below 0.6% in 2017,” it said.

The rating agency has revised economic growth for the year to 5.4% after the economy grew 5.7% in the first-half.

RAM noted that the number of defaulters in its portfolio stood at 51 as at end-June from 50 in the same period of last year.

With an overnight policy rate (OPR) hike expected towards the end of this year, RAM expected issuers to lock in rates.

It also expected the Malaysian corporate bond market to finally break out of the circa-RM80bil “ceiling” that has prevailed in the last four years, revising gross corporate bond issuance to between RM95bil and RM105bil from RM75bil to RM85bil. Gross corporate bond issuance stood at RM54.8bil in the firsthalf, up 41.7% from the same period of last year.

“Against the backdrop of a recovering economy and the higher possibility of an OPR hike towards end-2017, prospective issuers may opt to tap the market sooner rather than later – as reflected in the robust issuance during the first-half,” it said.