07 Jun 2012 Moody's Keeps A3 Rating, Stable Outlook on Malaysia

07 Jun 2012   Moody's Keeps A3 Rating, Stable Outlook on Malaysia

KUALA LUMPUR--Moody's Investors Service Thursday kept Malaysia's sovereign rating at A3 with a stable outlook, a decision supported by the country's resilient economic growth and a strong external position. The rating view was also guided by the country's deep and liquid domestic capital markets that assure favorable financing conditions, Moody's said in a statement. "Malaysia's credit profile would be further enhanced by fiscal reforms that address weaknesses in both revenues and expenditures," Moody's said. The stable outlook is also supported by recent trends in economic performance, as well as the initial benefits from the government's efforts at structural reform, it added. However, Moody's cautioned that jitters from the prolonged euro-zone crisis could find their way to Malaysia through the trade channel. Though Malaysia's shipments of electrical and electronics goods may fall on waning demand from the West, firm prices of commodities would help the trade-dependent nation to continue to run a current account surplus, Moody's said. The Malaysian banking system, sloshing in cash, would also limit contagion risk from the financial channel if euro-zone banks deleverage, it added. A deep capital market and a healthy foreign exchange reserve would also cushion against a "disruptive reversal" of overseas holdings of Malaysian government debt, Moody's said. The government's foreign-currency debt was only 3.6% of total debt as at end-March, which means there's very low exposure to foreign exchange-rate risk, Moody's added.