Published on 26 Aug 2022.
RAM Ratings has released its latest Corporate Default and Rating Transition Study. The study provides an update on the credit performance of RAM’s rated corporate portfolio in 1H 2022.
Malaysia’s GDP grew 6.9% in 1H 2022, exceeding expectations (1H 2021: 7.0%), on the back of strong domestic recovery and sustained exports. The job market remains sanguine and spare capacity remains. Meanwhile, domestic inflation, though rising, remains manageable due in part to price controls. These should propel the economic growth this year. On the other hand, external headwinds continue to loom. In particular, the risk of a global slowdown, spiraling inflation and continued supply chain disruptions caused by lockdowns in China and the Russia-Ukraine war could weigh on the domestic growth outlook in 2H 2022.
RAM’s rating actions, including outlook revisions, were still negative for 1H 2022, with three negative actions (one downgrade and two outlook revisions) against only one upgrade. Looking ahead, net rating action could still linger in the negative as issuers with negative outlooks continue to outnumber those with positive outlooks 3:1 as at end-June 2022. Only a limited number (<2%) are deemed at higher risk of default, although these issues are mostly guaranteed, cushioning investors’ losses in the event of default.
RAM’s rated portfolio profile remains robust. About 80% carry AA3 or higher ratings (indicating strong capacity to meet debt obligations on a timely basis). At a broader level, recent performance of Bursa-listed companies indicates corporate balance sheets remained healthy in 1Q 2022, with 60% registering Y-o-Y profit growth while maintaining conservative leverage (median: 0.21 times).
Chuan Shyang Lin
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