RAM Ratings head of data analytics,Julie Ng
KUALA LUMPUR: RAM Ratings expects overall rating actions to still remain downward biased in 2018, given the more numerous issuers on a negative outlook relative to a positive one.
It said on Monday 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 improve, backed by healthy economic growth, resilient corporate credit quality and still-accommodative interest rates.
Its head of data analytics, Julie Ng said on Monday that despite still downward-biased rating actions, the overall credit quality of RAM’s rated portfolio is expected to remain intact.
“As at end-2017, some 82% of the portfolio (by programme value) or 137 out of 180 issuers carried at least AA ratings. This underscores the portfolio’s high credit quality due to the low risk of default associated with these ratings,” adds Ng.
RAM Ratings had on Monday released the 20th instalment of its annual “Corporate Default and Rating Transition Study”.
The study covers 589 corporations and financial institutions rated by RAM between 1992 and 2017.
“On the whole, rating actions were still negatively biased in 2017, as downgrades exceeded upgrades during the year. Ten issuers (out of 180 rated entities as at Jan 1, 2017) had their ratings downgraded in 2017.
“Of these, three were from the media sector, on which RAM has a negative outlook due to its weaker prospects,” it said.
However, the downgrades-to-upgrades ratio 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), that is below the long-term average of 2.1 rating notches. There were no defaults during the year.
As at end-December 2017, the cumulative number of defaults stood at 51, with a combined rated programme value of RM13.2bil.
The Malaysian bond market enjoyed a bumper year in 2017. Corporate bond issuance hit a record high of RM124.9bil, supported by increased issuance, particularly in the final quarter, prompted by issuers’ expectations of possible interest rate hikes in 2018.
Following this record achievement, bond issuance is expected to moderate to RM90bil to RM100bil in 2018, based on RAM’s estimated pipeline that is still largely anchored by financial institutions and the infrastructure sector.
