More positive rating actions likely for this year, says RAM

PETALING JAYA: Malaysia registered more positive rating actions in the 2023 portfolio and is expected to remain the same in 2024.

In its latest Corporate Default and Rating Transition Study, RAM Rating Services Bhd (RAM Ratings) said corporate bond issuance is expected to stay healthy with a pipeline of Rm110bil to Rm120bil this year as the global economy, trade and domestic consumption are firming up.

RAM Ratings also noted that the projected amount will be supported by refinancing initiatives, investments from infrastructure and capital management by financial institutions as the local economy, which is expected to grow by 4.5% to 5.5%.

The agency said overall, its rated portfolio remains sturdy as more than 80% are currently rated at least AA3, indicative of a strong capacity to meet debt obligations.

“In 2023, positive rating actions (including outlook revisions) continued to outnumber negative actions by a ratio of 3:1, with the uptick in ratings emanating mainly from the financial services and infrastructure sectors,” it said.

RAM Ratings added that only one corporate default was recorded, and the issue was bank-guaranteed, hence causing no loss for investors.

“As at end-2023, the long-term average one-year Accuracy Ratio – a measure of RAM’S performance in assigning ratings – remained high at 70.1%,” it said.

Moving forward, RAM Ratings expects stressed credits to remain muted while rating actions are set to be positive this year in tandem with better economic prospects and the accommodative interest-rate environment.

It noted that entities with a positive outlook had outweighed the negative ones by 1.5 times.

“Additionally we have seen progress in the resolution of issues that underpin the negative outlook for some in the cohort.”