Moody's readjusts ceilings for Malaysia

SINGAPORE: Moody's Investors Service has yesterday adjusted the foreign currency bond and local currency country risk ceilings for Malaysia. In a statement, it said the sovereign rating of the Malaysian government is unaffected by these changes.

Source from (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/mudi/Article/
Published: August 14, 2012

The change in ceilings means that the highest rating that can be assigned to a domestic issuer in Malaysia, or to a structured finance security backed by local currency receivables, is now as follows:

The long-term foreign currency bond ceiling was raised to A1 from A3; the long-term foreign currency deposit ceiling remained at A3; the short-term foreign currency bond and deposit ceilings also remained unchanged at P-1; and the long-term local currency bond and deposit ceilings were lowered to A1 from Aa2.

Moody's said its decision to re-adjust the country ceilings for Malaysia is based on its assessment of moratorium risks, given the country's ability and willingness to service both its public and private cross-border debt obligations.


It is largely due to healthy current account surpluses, Malaysia has amassed a substantial foreign exchange reserve buffer over the past decade, especially since the global financial crisis, it said.

Simultaneously, Malaysia had continued to rely primarily on local currency instruments for financing - 96.5 per cent of direct government debt is denominated in ringgit as of the third quarter of 2012 - and the growth of the private sector's foreign currency indebtedness has remained manageable.

Thus, given ample reserve adequacy, the imposition of a moratorium on foreign exchange in the event of a government default is unlikely, Moody's said.

Since the complete dismantling of selective capital controls early last decade and the subsequent liberalisation of the exchange rate in 2005, non-resident absorption of Malaysian government securities had risen substantially.

Over the same period, Malaysia has sustained its role as the largest centre for Islamic finance, it said.

According to the Securities Commission, two-thirds of total sukuk outstanding globally as of end-June 2012 was issued in Malaysia.

Malaysia may be compelled to sustain capital account convertibility in order to maintain its market share for sukuk issuance, as well as ensure favourable financing conditions for the government. Bernama