Stable credit conditions expected for RAM-rated portfolio amid elevated uncertainty

Published on 03 Apr 2026.

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RAM Ratings expects credit conditions across its rated portfolio to remain broadly stable in 2026, underpinned by Malaysia’s resilient domestic economy notwithstanding a rising uncertainty environment. External risks have risen on both the scale and scope, particularly from a more protectionist trade backdrop and the risk of renewed supply-chain and shipping disruptions linked to the Middle East conflict. This view is consistent with RAM’s GDP growth forecast of 4.0%-5.0%, supported by sustained domestic demand, the global technology upcycle and stronger tourism activity from the Visit Malaysia 2026 campaign.

These views were shared at the RAM Credit Seminar 2026, the agency’s annual flagship event for investors, clients and market participants, held on 4 March. Woon Khai Jhek, Senior Economist at RAM, noted that while domestic fundamentals remain supportive, downside risks persist with higher uncertainty – particularly driven by the risk of new or wider US import tariffs and trade policy shifts. In addition, the Middle East conflict could exert broader spillovers through higher energy prices and trade disruptions, which in turn could weaken trade flows, increase input costs and weigh on external demand, thereby dampening economic momentum.

Reiterating that Malaysia’s diversified economic base and resilient fundamentals continue to support the country’s AAA/Stable sovereign rating, RAM Economist Nadia Mazlan stressed that the pace and credibility of fiscal consolidation are still key considerations.

The agency also highlighted divergent credit strength across the 13 Malaysian states under its State Implicit Strength assessment. Differences in economic structure and fiscal capacity can influence states’ ability and propensity to support government-linked entities, reinforcing the need for granular sub-sovereign analysis.

In the banking sector, RAM projects system loan growth of 4%-5% in 2026, broadly aligned with economic expansion. The agency also notes that bond market funding could substitute for loan demand if market conditions remain favourable. Amy Lo, Vice President of financial institution ratings, expects asset quality pressures to remain manageable from a record-low base with gross impaired loan ratio at 1.37% as at end-2025, despite pockets of risk in certain business and customer segments. Sector capitalisation is likely to normalise toward pre-pandemic levels of below 14% as banks prioritise higher dividend payouts and capital returns to shareholders to raise returns on equity.

For the insurance and takaful sector, RAM projects life insurance and family takaful new business growth to be broadly flat in 2026, as uncertainties dampen investment-linked policy sales, partly offset by continued demand for traditional products. Assistant Vice President of financial institution ratings, Loh Kit Yoong, said non-life premium growth should taper to 5%-6% as motor vehicle sales moderate from record highs. The Middle East conflict could, however, contribute to episodic market volatility which may influence investment performance. The sector specialist also noted that most specialised maritime risks are generally reinsured, mitigating the impact of the Middle East conflict for most insurers minimal so far. Overall, sector capital buffers are expected to remain sound ahead of the implementation of Bank Negara Malaysia’s revised risk-based capital framework, which is expected to strengthen the sector’s resilience.

Reviewing RAM’s 2025 rating portfolio trends, Joanne Kek, Senior Vice President of Data Analytics, reported overall stable credit trends with a positive bias, reflecting a higher number of previously assigned positive outlooks. As at end-2025, over 80% of ratings were at AA₃ or higher and 95% of rated entities carried stable outlooks. A more balanced mix of rating actions is anticipated in 2026, with positive and negative outlooks standing at four each at end-2025.

RAM’s analysis of Bursa Malaysia-listed non-financial corporates indicates that aggregate debt protection credit metrics remain generally sound, although performance is more uneven in some capital-intensive sectors with greater reliance on long-term borrowings. Kek added that credit risks are likely to remain both entity- and sector-specific, underscoring the significance of detailed, bottom-up credit analysis.

Sectoral discussions pointed to positive prospects for the construction and power and renewable energy sectors, supported by strong order books, capacity expansion opportunities and continued policy support. Stable views were maintained for the residential property, oil palm plantation, automotive, telecommunications and ports sectors, reflecting broadly steady credit fundamentals despite sector-specific challenges. Thong Mun Wai, Senior Vice President of corporate ratings, said the upbeat sentiment in construction sector is anchored by robust order books and strong project pipelines amid all-time high activity, while the residential property sector continues to benefit from supportive economic and financing conditions, despite moderation from post-pandemic peaks.

For the oil palm plantation sector, Thong sees crude palm oil prices to remain above long-term averages, supporting the sector’s stable view despite policy- and climate-related risks. The automotive sector continues to be underpinned by steady fundamentals and upcoming model launches, though total industry volume is envisaged to ease from record highs.

Chong Van Nee, Senior Vice President of Infrastructure & Utilities Ratings, said the power and renewable energy sector is positioned for sustained growth, backed by capacity expansion opportunities, and continued government support and policy stability, which underpin the positive outlook. The telecommunications sector is forecasted to remain broadly steady amid intense competition in increasingly mature mobile and fixed broadband markets, alongside uncertainties over Digital Nasional Berhad’s operating and funding requirements following its transition to full private ownership. The ports sector has remained resilient, benefiting from firm throughput growth last year despite ongoing trade and supply-chain configuration. Infrastructure & Utilities Ratings Senior Vice President, Davinder Kaur Gill, views external risks to be skewed on the downside given the higher uncertainty environment but expects regional transshipment activity to stay healthy, supported by spillover demand from Singapore, ongoing infrastructure investments and continued policy support, although prolonged disruption to major maritime routes could affect throughput mix and operating costs.

The seminar also featured panel discussions on issuer-specific credit fundamentals and new issuer focus, highlighting the growing need for granular credit differentiation in an increasingly complex operating environment. The key highlights from the panel discussion can be found at www.ram.com.my.

RAM is in the midst of conducting a deeper scenario analysis on our rated portfolio to assess the credit impact of the ongoing developments, with findings expected to be released in the coming weeks.

 

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my

 

About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Credit Rating Agencies. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 

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