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Announcement:

Moody's Changes Ceilings of Malaysia

Global Credit Research - 07 Jan 2013

Singapore, January 07, 2013 -- Moody's Investors Service has today adjusted the foreign currency (FC) bond and local currency (LC) country risk ceilings for Malaysia. The sovereign rating of the Government of Malaysia is unaffected by these changes.

The change in ceilings mean that the highest rating that can be assigned to a domestic issuer in Malaysia, or to a structured finance security backed by local currency receivables, is now as follows:

1) The long-term FC bond ceiling was raised to A1 from A3;

2) The long-term FC deposit ceiling remains at A3;

3) The short-term FC bond and deposit ceilings also remains unchanged at P-1; and

4) The long-term LC bond and deposit ceilings were lowered to A1 from Aa2;

RATINGS RATIONALE

Moody's decision to readjust the country ceilings for Malaysia is based on the rating agency's assessment of moratorium risks given the country's ability and willingness to service both its public and private cross-border debt obligations.

Largely due to healthy current account surpluses, Malaysia has amassed a substantial foreign exchange reserve buffer over the past decade and especially since the global financial crisis. Simultaneously, the government has continued to rely primarily on LC instruments for financing—96.5% of direct government debt is denominated in Malaysian ringgit as of Q3 2012—and the growth of the private sector's FC indebtedness has remained manageable. Thus, given ample reserve adequacy, the imposition of a moratorium on foreign exchange in the event of a government default is unlikely.

Since the complete dismantling of selective capital controls early last decade and the subsequent liberalization of the exchange rate in 2005, non-resident absorption of Malaysian government securities has risen substantially. Over the same period, Malaysia has sustained its role as the largest center for Islamic finance. According to the Malaysia Securities Commission, two-thirds of total sukuk outstanding globally as of end-June 2012 was issued in Malaysia. Thus, Malaysia may be compelled to sustain capital account convertibility in order to maintain its market share for sukuk issuance, as well as ensure favorable financing conditions for the government.

METHODOLOGY

Moody's country ceilings capture externalities and event risks that arise as a consequence of locating a business in a particular country and that ultimately constrain domestic issuers' ability to service their debt obligations. As such, the ceiling encapsulates elements of the economic, financial, political, and legal risks in a country, including political instability, the risk of government intervention, the risk of systemic economic disruption, severe financial instability risks, currency redenomination, and natural disasters among other factors, that need to be incorporated into the ratings of even the strongest domestic issuers. The ceiling caps the credit rating of all issuers and transactions with material exposure to those risks -- in other words, it affects all domestic issuers and transactions other than those whose assets and revenues are predominantly sourced from or located outside of the country, or which benefit from an external credit support.

For a more detailed discussion of Moody's approach to country risk ceilings, please see Moody's Rating Implementation Guidance entitled "Local-Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations", published on 16 August 2012.

REGULATORY DISCLOSURES

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Christian de Guzman
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Bart Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Moody's Changes Ceilings of Malaysia
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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