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Rating Downgrade or Revision – Cost of Borrowing is Up Sir! That Matters…

January 14, 2016

Dzulkefly Ahmad (TMI)

Senator Datuk Seri Wahid Omar in the Prime Minister’ s Department said that Moody’s Investors Service’s revision of the country’s sovereign rating outlook to stable from positive was not a downgrade.

He insisted that it is a “revision” in the outlook which reflects the current global economic scenario.

Moody’s has affirmed Malaysia’s issuer and senior unsecured bond ratings at A3 and changed the outlook to stable from positive.

In fact, Moody’s revised the ratings of three other government-linked companies – Malaysia Airports Holdings Bhd, Tenaga Nasional Bhd and Penerbangan Malaysia Bhd – to stable from positive.

Does it really matter whether the second finance minister said it was a downgrade or a revision?

But what is important to the business community is whether this action on rating by Moody’s and all other rating agencies later, will impact adversely on the cost of borrowing for the business community in Malaysia.

Bloomberg had actually reported that borrowing costs on Islamic bonds will climb to a record.

Maybank Islamic Asset Management, according to Bloomberg, said benchmark sukuk yields will rise to 5%. That is what Wahid should be concerned about than to be pedantic on terminologies of a “downgrade” or a “revision”.

The outlook for higher borrowing costs has also hurt Malaysia’s Islamic bond sales in 2015.

This trend is set to stay, as opined by investment banks like RHB Investment Bank. That is what is arguably worrying to the business community and particularly the Sukuk and Islamic Financial market. – January 14, 2016.

* Dr Dzulkefly Ahmad is the Strategy Director of Parti Amanah Negara.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
– See more at: http://www.themalaysianinsider.com/sideviews/article/budget-downgrade-or-revision-dzulkefly-ahmad#sthash.ujhL0v7i.dpuf

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