RAM Ratings has released its latest Corporate Default and Rating Transition Study. The study provides an update on the credit performance of RAM’s rated portfolio in 2023.
Malaysia’s GDP expanded by a moderate 3.7% in 2023 (2022: +8.7%), due to weaker export demand and cooler consumption momentum. With the global economy and trade seen to be firmer this year and still-resilient domestic consumption, however, the country’s economy is projected to grow 4.5% – 5.5% in 2024. Amid this backdrop, RAM expects corporate bond issuance to remain healthy with a pipeline of RM110 bil – RM120 bil this year (2023: RM118.3 bil), supported by refinancing initiatives, investments for infrastructure projects and capital management by financial institutions.
Overall, the credit profile of RAM’s rated portfolio remains sturdy. More than 80% are rated at least AA3, indicative of a strong capacity to meet debt obligations. In 2023, positive rating actions (including outlook revisions) continued to outnumber negative actions by a ratio of 3:1, with the uptick in ratings emanating mainly from the financial services and infrastructure sectors. During the year, one corporate default was recorded; the issue was bank-guaranteed which translated into no loss for investors. As at end-2023, the long-term average 1-year Accuracy Ratio – a measure of RAM’s performance in assigning ratings – remained high at 70.1%.
Looking ahead, RAM said it expects stressed credits to remain muted while rating actions could continue a positive path in 2024, in tandem with better economic prospects and the accommodative interest rate environment. Year-to-date, entities with a positive outlook outnumbered those on negative by 1.5 times. Additionally the ratings agency said it has seen progress in the resolution of issues that underpin the negative outlook for some in the cohort.
