Depth report

　　

International credit rating agencies are again looking down on the economic prospects of Malaysia. This time it was Moody's turn. Although the agency maintained the Malaysian government-issued and senior unsecured bond rating at "A3", the outlook has been revised down from "positive" to "stable".

    The downgrade of the outlook by the credit rating agency this time seems to be detrimental to Malaysia, but it only caused some small ripples in the market and did not cause a huge storm, and foreign investment did not have much negative reaction.

    After the Moody's report was released, both the ringgit and the Malaysian stock market faced downward pressure. The ringgit was approaching the trough level written in September last year. However, the decline in local stocks and foreign exchange markets was mainly dragged down by regional market instability and heavy oil prices.

    The agency adjusted its outlook for Malaysia mainly because the collapse of oil prices impacted Malaysia’s fiscal revenue. This is understandable. Oil prices have been declining, and now they have fallen below the US$30 mark, which is frightening. Malaysia As an oil-producing country, it must be implicated, and the prospects are not optimistic.

    Compared with the capital flight caused by Fitch's downward adjustment of Malaysia's outlook to "negative" in July 2013, this time Moody's will not cause market panic.

    Moody's has always been relatively optimistic about Malaysia. In the past two years, reports on issues such as the Malaysian budget, the ringgit and political changes have tended to be positive.

    Another evaluation agency, Standard & Poor’s, as early as 2008 during the financial tsunami, revised Malaysia’s outlook as “stable”, while Fitch listed Malaysia’s outlook as “negative” in July 2013 and caused market panic, but in May of last year It has been upgraded to "positive", dispelling foreign investment concerns.

    Now Moody's is moving closer to them and adjusting the outlook to stabilize. For the first time, the three major rating agencies have made the same pace. Together, they have given the same assessment to Malaysia's outlook.

    A passage from the Moody's report is worth pondering. The agency said the "stable" outlook shows that the risks of rising and falling are in balance. In other words, Malaysia's prospects have now reached a tipping point, and there is only one line between prosperity and decline. If it can support the past, it is expected to come back, but once the external and domestic headwinds blow and the situation deteriorates, it may fall into a crisis of negative outlook and downgrading.

    The Malaysian economy is like taking a steel line, and there can be no one step wrong. 2016 will be a sad hurdle and full of challenges. The economic and market performance since the beginning of the year has made it difficult to frown. Since the beginning of the year, oil prices have plummeted, global stock markets have plunged, and the Malaysian foreign exchange market has been weak. The latest export and industrial production data have been worse than expected. Various signs indicate that Malaysia's prospects are becoming more hazy.

    Malaysia must take advantage of this critical moment to respond quickly and accelerate the pace of restructuring. The Malaysian government acted swiftly this time and responded early in the morning. It will announce the latest revised budget on January 28. Earlier, the government proposed that companies should sell assets and repatriate funds. Such measures obviously did not work. Khazanah responded to the government and made it clear that it would not sell overseas assets with unpaid returns. The authorities must make greater efforts in the latest revised budget, stop proposing unrealistic measures, prescribe the remedy for the disease, and make quick and accurate moves, so as to turn the tide, reverse the perception of credit rating agencies and boost investment at this time of change. The confidence of the person.