MOODY'S Investors Service has raised the outlook for Malaysia's Baa1 foreign currency country ceilings to positive from stable in light of the country's strengthening external financial position.
The international rating agency also has upgraded the outlook for the Baa1 rating on the government's foreign currency bonds to positive, while maintaining the stable outlook for the A3 domestic currency bond rating.
The news boosted sentiment on the MSEB yesterday and helped the Composite Index (CI) to regain most of the ground it lost earlier in the week. The benchmark index ended the day 7.85 points or nearly 1% up at 815.4.
“Moody's announcement has certainly aided market sentiment,'' said OSK Research assistant general manager Pankaj Kumar.
Analysts said the change in the outlook for the foreign currency rating was normally a precursor to an upgrade of rating.
“I expect an upgrade to come within two months given that we already meet most of the criteria for an upgrade,” said the head of research at a leading stockbroking firm. “The coming general election will stabilise the situation and remove any concerns they (Moody's) have.''
He expects Malaysia's rating to be upgraded by a notch to A3.
The upgrade would help boost the confidence level in the private sector and, in turn, encourage private investment and consumption in the country, the research head said, adding that a higher credit rating would also mean lower cost of borrowings in the foreign debt markets.
In a statement issued in Hong Kong yesterday, Moody's said the level of foreign direct investment in Malaysia and trends in fiscal policy during 2004 in the context of national elections would be significant to any potential rating change.
The rating agency pointed out that private investment in the country had “lacked dynamism” in the last few years and the public sector had been the main driver of growth.
It said the medium-term uncertainties were the country's ability to maintain its export competitiveness if private-sector investment did not increase, and the ringgit's pegged exchange rate - in place since 1998 - which might have affected investment decisions.
Moody's said: “There does not appear to be immediate pressure on the exchange-rate regime, how long it will remain in force is unclear.”
The indicators cited by Moody's for the change in the outlook for Malaysia's foreign currency country ceilings included the large current account surpluses recorded since the Asian financial crisis of the late 1990s, last year's increase in the country's international reserves, its relatively low level of external debts and short-term debt in relation to current account receipts, and the positive trend in net international investment position.
“These factors have further reduced the country's vulnerability to external shocks and reinforced external liquidity,'' the rating agency said.
Moody's also revised yesterday, to positive from stable, the outlook for the foreign currency debt and long-term deposit ratings on six banks in Malaysia: Bumiputra-Commerce Bank Bhd, HSBC Bank Malaysia Bhd, Malayan Banking Bhd, Public Bank Bhd, RHB Bank Bhd, and Standard Chartered Bank Malaysia Bhd.
Elsewhere in the region, most stock markets also finished higher yesterday.
The Jakarta market continued to climb higher after being bogged down by concerns over bird flu earlier in the week. The Jakarta Stock Exchange Composite Index rose 22.5 points or 3% to 759.
News that Morgan Stanley Capital International Inc is looking at including Taiwan and South Korea in its developed market indices fuelled strong buying in their stock markets. Seoul's Kospi Index rose 9.3 points or 1.1% to 850 while the Taiwan Weighted Index gained 85 points or 1.4% to 6,353.
Bangkok's SET Index, however, fell 23 points or 3% to 711, halting a three-day rebound. Heightened fears that the bird flu virus had spread to pigs in Vietnam dampened sentiment on the Thai bourse, although there was no official confirmation on the matter.