RAM hosts annual Credit Seminar

Published on 03 May 2024.

(From left) RAM Ratings Deputy CEO Siew Suet Ming, Thong Mun Wai, Tan Han Nee, Chong Van Nee & Davinder Kaur Gill.

RAM Rating Services Berhad (RAM)’s annual Credit Seminar, held this year on April 29, hosted close to 150 delegates from the investment community. The forum discussed Malaysia’s economic performance and macro forecasts as well as the credit outlook for key sectors covered by RAM.

RAM’s Head of Economic Research and Senior Economist, Woon Khai Jhek, expects the domestic economy to improve, albeit slowly, given risks from slower global growth, rising geopolitics and uncertainties over fuel subsidy rationalisation. “Notwithstanding 2023’s underwhelming growth performance, we have maintained our GDP growth forecast for 2024 at 4.5%-5.5%, premised on a resilient services sector, recovery of the manufacturing sector, steady domestic demand and a rebound in external demand,” he said.

The current global trade and semiconductor downcycle has shown signs of bottoming out, providing upside momentum to exports. Employment growth continues to outpace the pre-pandemic trend and headline inflation remains contained, supporting domestic consumption. The upcoming subsidy retargeting and higher service tax could however crimp this trajectory, eating into aggregate purchasing power.

As a leading proxy for the economy, the Malaysian banking sector is poised to remain on stable outlook. Loan growth is expected to ease slightly to 5% this year, factoring in the potential squeeze on consumption from the impending fuel subsidy rationalisation. Exports and global trade recovery should however boost business loans.

“Thanks to hefty overlays built up earlier, Malaysian banks’ asset quality will stay healthy, although profitability margins are likely to remain suppressed due to stiff competition,” RAM’s Senior Rating Specialist Amy Lo commented. A growing commitment from banks to integrate sustainability into operations has seen much of lending directed towards renewables and transition activity, a trend which is expected to gain momentum.

Speaking on REITs and the property market in general, RAM’s Co-Head of Structured Finance Ratings, Tan Han Nee, observed that the industrial property segment is still the most vibrant, thanks to faster adoption of e-commerce, continued business expansion and Malaysia’s growing popularity as a data centre hub. The REIT market is maturing further, no longer solely relying on the sponsor pipeline and expanding beyond comfort zones for diversification.

On the energy transition front, Infrastructure & Utilities Ratings Co-Head Chong Van Nee observed that the government’s game plan to reach net zero by 2050 would require massive financing and investments, human capital, supportive policies and strong governance to ensure successful execution. Some RM1.3 tril of investment opportunities are targeted to be generated under the National Energy Transition Roadmap, 34% of which will be required for the upgrading of the renewable energy grid network and power generation and 25% to green land transportation.

A key enabler to attract funding will be the provision of RM2 bil of initial seed funding into the National Energy Transition Facility, which will be complemented by RM200 billion from financial institutions. Tapping the well-developed bond market will mobilise private capital flow, particularly for infrastructure financing. “In this respect, a greater focus on ESG principles and the continued availability of fiscal incentives can boost financing interest. Attracting foreign participation is also key to ensuring funding availability,” Chong said. Most prominently, the UAE’s Masdar plans to develop up to 10 GW of renewable projects in Malaysia.

Rounding off the forum with the port sector, Infrastructure & Utilities Ratings Co-Head Davinder Kaur Gill said that amid the volatile maritime environment from geopolitical developments, the sector will need to build alternative paths to meet demand, hedge unforeseen disruptions, and boost connectivity and influence with a view to replicating the strong year it had in 2023. While the impact on Malaysia has been muted, collaborations and reduced red tape are critical to capitalising on opportunities for near-shoring/reshoring as US-China trade protectionism continues, improving transit time, boosting intra-Asia growth and addressing the Strait of Malacca chokepoint.

RAM’s rated portfolio stood at RM1.09 trillion by programme value as at end-2023, with 85% of rated issuers carrying ratings of AA3 and above. Head of Corporate Ratings, Thong Mun Wai, shared that 85% of ratings were reaffirmed last year, with positive rating actions outnumbering negative actions by 3:1. For 2024, RAM’s rating actions are expected to lean positive, supported by improving economic prospects and an accommodative interest rate environment.

The RAM Credit Seminar is an annual flagship event for investors, clients and associates of RAM.

Media contact
Sakinah Ariffin
(603) 3385 2500
sakinah@ram.com.my

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RAM hosts annual Credit Seminar