Malaysian Rating Corporation Berhad (MARC) yesterday held its 2018 Investors’ Briefing on the Malaysian economic and sectoral outlook in Hilton Kuala Lumpur. The annual briefing which was attended by financial institutions and other prominent sectors in Malaysia serves as a platform to promote multi-stakeholder dialogues as well as share the agency's views on the economy and the prospects of industrial sectors in MARC's rating universe.
Among the highlights of yesterday’s briefing were:
- MARC sees GDP growth coming in at 5.3% this year, supported by resilient private consumption spending and ongoing infrastructure spending. A good external sector performance is also expected to provide impetus for growth although there are concerns that protectionism could intensify. The improving global oil market could provide a boost to government revenue, overall business sentiments and the investment climate. Malaysia’s macroeconomic variables continue to be in line with its single-A peers.
- Against the supportive economic growth backdrop, MARC foresees non-financial corporates in its rated universe continuing on predominantly stable ratings trajectories in 2018. Non-financial corporates are likely to report positive earnings growth in 2018 while corporate leverage is expected to remain at moderate levels. Accordingly, MARC is maintaining a stable outlook on most sectors with the property sector being a notable exception, particularly for players in the high-end residential property segment.
MARC said its outlook for the banking sector is stable, premised on banks’ strong capital positions, manageable downside risks to asset quality and sustained earnings generation. MARC expects the overall impact of MFRS 9 adoption to have a modest impact on banking sector capital adequacy ratios. Banks’ funding profiles are projected to remain healthy in the context of continued good access to capital markets and more muted credit growth.
- MARC shared refinements it had made to its financial institutions rating methodology, primarily its introduction of an Intrinsic Credit Strength Rating (ICSR) to enhance the transparency of MARC’s rating process for financial institutions. The ICSR excludes the external credit support elements which are incorporated in the final ratings of a financial institution and its obligations.
- Finally, MARC provided a preview of its soon-to-be-launched Impact Bond Assessments, which are essentially second opinions on the green, social or sustainability credentials of bonds issued to fund SRI projects. MARC said the addressable universe for this analytical offering would be fixed-income financial instruments issued for the purpose of funding projects with positive environmental and/or social outcomes.
The briefing’s opening remarks were delivered by MARC’s Chief Executive Officer Mohd Razlan Mohamed who reiterated the purpose of MARC’s annual briefings. The aim of these briefings, he said, were to “enhance transparency and accountability in the capital markets” and “to foster a robust exchange of perspectives”.