Economists: ‘Junk’ status for Malaysian bonds by investors only, not ratings agencies
(Malay Mail Online) – Two local economists have challenged the view that Malaysian bonds deserve “junk” status, saying that the assessment came only from private investors and not ratings agency.
Tan Sri Ramon Navaratnam (pic), who chairs the Asli Centre of Public Policy Studies, noted that only investors have said that bonds from Malaysia, Peru, South Africa, Bahrain, Turkey and Kazakhstan should be downgraded.
“The views of a few investors do not necessarily mean that international rating agencies agree with the assessment as well,” he was quoted telling New Straits Times yesterday.
But Ramon also said Malaysia should keep a cautiously optimistic outlook until rating agencies review the rating for the country.
“Currently, agencies’ ratings will continue but we can’t take it for granted. We have to continue to ensure that the economic fundamentals do not weaken further,” he said.
On Tuesday, Standard & Poor’s gave Malaysia an A stable rating, while Fitch Ratings upgraded Malaysia to A stable.
Datuk Dr Nazri Khan Adam Khan, Affin Hwang Investment Bank’s vice-president and head of retail research, similarly said that the “junk” outlook for Malaysia’s credit rating was made by investors instead of ratings agencies.
Nazir reportedly said that investors had based their assessment on the weak conditions of the country’s stock market, also saying that it is too extreme to put Malaysia’s bonds in the same category as Brazil’s low-quality state bonds.
“This causes them to react excessively and start to oversell. This is a regular occurrence in the stock market,” he was quoted saying by the English-language paper, referring to traders.
Yesterday, news agency Bloomberg cited data from ratings agencies Moody’s, when reporting that credit-default-swaps traders view six developing nations including Malaysia as deserving to follow Brazil’s downgrade to “junk status”.
Moody’s had this week graded Malaysia at A3, but traders see it six levels lower at Ba3, faring slightly worse than Peru in the eyes’ of the traders which gave that country a Ba2 grade.
The traders see Malaysia as one notch better than South Africa at B1, and also faring better than Bahrain, Turkey, Kazakhstan at B2.
Moody’s data classifies Ba1 to B3 as the junk category.
The Bloomberg report yesterday saw CIMB Group chairman Datuk Seri Nazir Razak weighing in on photo-sharing site Instagram, where he said the traders’ view belied the country’s actual situation and fundamentals’ strength.
Putrajaya must disprove or sue over negative reports by global media as the unflattering coverage is causing markets to view Malaysia more negatively than it actually is.
“Suspect it’s due to so much negative coverage in WSJ, FT and NYT — all ‘capital’ people read at least one if not all of them. We have to change the current narrative about Malaysia with answers or legal suits; can’t just ignore them,” Nazir had said, referring to the Wall Street Journal, Financial Times and New York Times.
In recent times, the WSJ had published reports relating to the Finance Ministry’s 1Malaysia Development Bhd (1MDB) and on a RM2.6 billion controversy linked to the prime minister, while the NYT had reported this Tuesday of a US Justice Department’s convening of a grand jury to consider possible indictments for corruption over multi-million property buys there by individuals associated with the prime minister.
Prime Minister Datuk Seri Najib Razak, who is also Nazir’s brother, has denied any impropriety over a RM2.6 billion donation, which has been described as a political donation to the Umno party that he leads.
