MARC expects slower corporate debt issuance this year

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) expects corporate debt issuance to soften this year due to the economic shock led by the coronavirus (Covid-19) pandemic as business and consumer activity freeze.

In a statement yesterday, chairman Datuk Azizan Abd Rahman said that the Covid-19 pandemic had sharply contracted every economic sector and impacted all social divides.

“With the government’s stimulus packages in place, MARC expects that for the year 2020, the economy will face a slow recovery to pre-covid levels, with an expected contraction in real gross domestic product (GDP) and private investments, which would impact corporates’ appetite to raise funds,” he said.

MARC estimates that the total gross issuance of corporate bonds in 2020 will moderate to about Rm80bil to Rm90bil.

“Having laid the necessary steps to capture the initial wave in ensuring a sustainable domestic capital market and under the new leadership of our group CEO Datuk Jamaludin Nasir, MARC will come out of the Covid-19 pandemic stronger and more focused in delivering relevant products and services for the capital market,” Azizan said.

For the financial year ended Dec 31, 2019, MARC’S revenue improved by 11.6% to Rm16.6mil, as rated corporate issuances showed healthy increases in both value and volume during the year.

Its profit before taxes recovered strongly to Rm5.7mil in 2019, MARC said.

MARC said it continued to maintain a strong portfolio of corporate bond issuers, having assigned 22 new ratings with a total programme size of Rm25.74bil.

As at Dec 31, 2019, MARC had completed 831 ratings since its inception, amounting to Rm553.2bil in issuance value.

MARC said its bond and sukuk ratings improved in terms of both rating accuracy as well as rating stability in 2019, reaching their highest levels in 19 years.

“Over the 1998-2019 period, the one-year rating accuracy ratio improved to 69.4% (from 68.6% in 2018), while the long-term rating stability rate improved to 86.8% (from 86.3% in 2018),” the rating agency said.

It explained that the long-term rating accuracy ratio measured MARC’S effectiveness in predicting defaults, while the long-term average rating stability rate evaluated the frequency and magnitude of rating changes over the period of 1998-2019. Last year, MARC bagged Malaysia’s “Rating Agency of the Year 2019” prize at Hong Kong-based The Asset magazine’s Triple A Awards, for the second year running.