Malaysias credit fundamentals in comparison to regional countries. - - PowerPoint PPT Presentation

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Malaysias credit fundamentals in comparison to regional countries. - - PowerPoint PPT Presentation

Oct 03, 2023 269 likes •476 views

Providing Direction Opinions That Shape The Market Brexit and risks facing ASEAN Sovereigns. Malaysias credit fundamentals in comparison to regional countries. Esther Lai, Head of Sovereign Ratings 18 July 2016 OUTLINE I. BREXIT AND

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Brexit and risks facing ASEAN Sovereigns. Malaysia’s credit fundamentals in comparison to regional countries.

Esther Lai, Head of Sovereign Ratings 18 July 2016

Providing Direction

Opinions That Shape The Market

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OUTLINE

I. BREXIT AND CHANGING RISKS FOR ASEAN SOVEREIGNS II. MALAYSIA’S CREDIT FUNDAMENTALS

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Growing Sovereign Coverage

Japan

gAA3 (pi)/negative

Bahrain

gBBB2(pi)

South Korea

gA1(pi)/positive

United Arab Emirates

gAA2(pi)

Kazakhstan gBBB2(pi) Indonesia

gBBB2(pi)

Kuwait

gAA3 (pi)

Saudi Arabia

gAA2(pi)

/negative Singapore

gAAA(pi)

Malaysia

gA2(pi)

India

gBB2 (pi)/positive

Philippines

gBBB3(pi)

Thailand

gBBB1(pi)

Turkey

gBBB3(pi)/negative

Qatar

gAA3 (pi)

Vietnam

gBB3(pi)

Laos

gB1 (pi)/negative

Oman gA1(pi) /negative Cambodia

gB1(pi)

China

gAA3 (pi)

Myanmar

gB2 (pi)

Brunei

gA1(pi)

Property of RAM Rating Services Berhad. Content is accurate at the time of printing

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ASEAN Sovereign Ratings

Country Global Rating ASEAN Rating Brunei gA1(pi)/stable seaAAA(pi)/stable Cambodia gB1(pi)/stable seaBB3(pi)/stable Indonesia gBBB2(pi)/stable seaAA3(pi)/stable Laos gB1(pi)/negative seaBB3(pi)/negative Malaysia gA2/stable seaAAA/stable Myanmar gB2(pi)/stable seaB1(pi)/stable Philippines gBBB3(pi)/stable seaA2(pi)/positive Singapore gAAA(pi)/stable seaAAA(pi)/stable Thailand gBBB1(pi)/stable seaAA1(pi)/stable Vietnam gBB3(pi)/stable seaBB1(pi)/stable Global and ASEAN Rating Scale : different perspective of government risk ASEAN sovereign ratings broadly stable

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Brexit to Malaysia’s trade

9.6% 9.3% 7.9% 8.1% 8.5% 8.9% 1.1% 1.0% 1.0% 1.0% 1.0% 1.2% 2012: European Sovereign Debt Crisis

  • 60
  • 40
  • 20

20 40 60 80

  • 15%
  • 10%
  • 5%

0% 5% 10% 15% 20% 2010 2011 2012 2013 2014 2015 Exports (RM billion) Export Growth (%) Exports: EU excl. UK (RHS) Exports: UK (RHS) Total Export Growth Exports Growth: EU excl. UK *Values represent % of total exports

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Brexit to Malaysia’s trade

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 1 2 3 4 5 6

Food and Live Animals Beverages and Tobacco Crude Materials Inedible Mineral Fuels Animal, Vegetable Oils and Fats Chemicals Manufactured Goods Machinery and Transport Equipment Miscellaneous Manufactured Articles Others

Percentage of Total (%) Exports (RM billion) UK's Share of Exports Percentage of Product Group's Total Export (RHS)

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Brexit to Malaysia’s FDI

2012: European Sovereign Debt Crisis

  • 20%
  • 10%

0% 10% 20% 30% 40%

  • 10
  • 5

5 10 15 20 2010 2011 2012 2013 2014 2015 % of Total Inward FDI (%) Inward FDI (RM billion) Inward FDI from UK Inward FDI from Europe (excl UK) Inward FDI from UK as % of Total FDI [RHS] Inward FDI from Europe (excl UK) as % of Total FDI [RHS]

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Limited direct impact to ASEAN trade & FDI

0% 5% 10% 15% 20% 25% 30% UK EU (excl UK)

Percentage of total exports

0% 10% 20% 30% 40% 50% 60% 2014 2015

Percentage of total investments

2013/2014 for Brunei

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Uncertainties on EU a greater concern

  • Brexit an uncharted territory
  • Economic and political uncertainties heightened
  • IMF cut global growth - 2016 : 3.1% from 3.2%,

2017 : 3.4% from 3.5%

  • No rating impact for ASEAN sovereigns so far
  • EU risks remain on the radar
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Risks for ASEAN sovereigns - China

  • China a bigger trade and investment influence
  • Concerns on sharp China slowdown reduced
  • Policy levers ample
  • gAA3(pi)/stable; seaAAA(pi)/stable
  • 20%
  • 10%

0% 10% 20% 30% 40% 50% Rail Highway Civil aviation

Freight trends

50 100 150 200 250 300

Debt (% GDP)

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Risk for ASEAN sovereigns - politics

  • Political developments affect sovereign

creditworthiness

  • Cabinet reshuffle in Malaysia, Thailand, Indonesia
  • Leadership changes in Vietnam, Myanmar,

Philippines

  • Geopolitical tensions expected to be restrained in

South China Sea

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Risks for ASEAN Sovereigns - Recap

  • Brexit – limited direct impact, risks from broader

EU remains

  • China a bigger concern although risks of sharp

slowdown has eased

  • Political developments will shape future rating

transitions

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Malaysia sovereign rating

  • gA2/stable; seaAAA/stable

 Resilient growth backed by strong macro

fundamentals

 Structurally sound external position

  • Persistent deficits, elevated debt, rising contingent

liabilities

  • Political developments could lead to policy

challenges

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Resilient growth

  • 2016 growth 4.2% for Malaysia

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 MY IN PH SG TH VN 2013 2014 2015

% change

GDP growth

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Structurally sound external position

  • Current account to narrow : 1% surplus 2016
  • Export diversity buffers weak external demand and

low commodity prices

  • 5

5 10 15 20 25 MY IN PH SG TH VN 2012 2013 2014 2015

Current account performance

% GDP

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Weak fiscal metrics

  • Persistent deficits but improving trends
  • Fiscal reforms supportive of consolidation

2 4 6 8 10 12 14 16 18 2009 2010 2011 2012 2013 2014 2015

%

  • 10
  • 5

5 10 15 20 2009 2010 2011 2012 2013 2014 2015

% Supplies and services variance (% budget)

  • 5
  • 4
  • 3
  • 2
  • 1

1 2 MY IN PH SG TH VN

Fiscal balance av 2010-2015

Emoluments variance (% budget)

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Weak fiscal metrics

  • Debt level high and sticky
  • Growing contingent liability; no immediate liquidity

risk

10 20 30 40 50 60 70 MY IN PH TH VN*

2.9 12.3 34.3 26.4 5 10 15 20 25 30 35 40 2016 2017-2020 2021-2030 2031-2045 1 Malaysia Development Berhad Danainfra Pengurusan Air SPV Berhad Perbadanan Tabung Pendidikan Tinggi Nasional Prasarana Projek Lebuhraya Usahasama Berhad Turus Pesawat

RM billion

Year of debt maturity

Guaranteed debt

10 11 12 13 14 15 16 50 100 150 200 2010 2011 2012 2013 2014 2015 As a % of GDP (RHS) RM bn %

Debt/GDP % Government guarantees

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Political developments

  • Domestic politics – evolving
  • Risk on policy effectiveness ?
  • Contingent liability raised a notch
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Malaysia Sovereign Rating - Recap

  • gA2 and seaAAA, stable outlook
  • More downside than upside pressures
  • Downward triggers
  • Deterioration in government finances
  • Worsening of domestic politics, resulting in

policy ineffectiveness

  • Prolonged current account deficits
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RAM Rating Services Berhad Suite 20.01, Level 20, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur T: (603) 7628 1000 / (603) 2299 1000 F: (603) 7620 8251 W: www.ram.com.my

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Providing Direction

Opinions That Shape The Market