Malaysia's Credit Worthiness Continues To Be High, Says Economist

By Siti Radziah Hamzah KUALA LUMPUR, April 17 (Bernama) -- Contrary to brickbats hurled by critics over its financial standing, renowned economist Dr Yeah Kim Leng says Malaysia's creditworthiness continues to rank highly among international investors as evident by the success chalked by the US$1.5 billion sukuk issued by the government. He said this has also raised confidence that the 'positive' and 'stable' outlook ratings on Malaysia made by Moody's and Standard & Poor's, respectively, would remain unchanged. Besides this, the over subscription would boost sentiment and help Malaysia's foreign exchange inflows. "The over subscription suggests that the Malaysian government has no problem in raising funds in the international market," said Dr Yeah, who is also the Dean of Business at Malaysia University of Science and Technology. He told Bernama Friday that given the confidence over its financial standing, Malaysia was unlikely to face any downgrade prospects from two biggest rating agencies. In contrast, "if Fitch were to downgrade Malaysia, the impact would likely to be small given the positive and stable outlook ratings by the two rating agencies." What this means here is that international investors still remain confident of Malaysia's creditworthiness while the over subscription proves that they are prepared to continue to lend to the Malaysian government. There was all round positive response when Malaysia sold US$1.5 billion of 10-and 30-year global Islamic bond after a lapse of almost four years. The country had issued US$1 billion of 10-year and US$500 million of 30-year benchmark Trust Certificates. The 10-year tranche was oversubscribed by almost seven times and the 30-year tranche was oversubscribed by approximately six times. It attracted an aggregate interest of over US$9 billion (RM32.8 billion) from a combined investor base of over 450 accounts. "This amount is meant to repay coming maturing facilities. "The over subscription would also help boost the undervalued ringgit although there are other factors affecting the sentiment for the currency," he added. Inter-Pacific Research Sdn Bhd Head of Research Pong Teng Siew also commented that the interest in Malaysian bonds stemmed from the bright outlook for the ringgit as the currency's weakening cycle had come to an end. "It has been my view, for a long time now, that the ringgit will not weaken beyond 3.70 against the greenback. "The US dollar is weakening on expectation that the US Federal Reserve would raise interest rates but in my opinion the US economy is too weak to do that," he added. -- BERNAMA