Strong liquidity and capital buffers set to avert downgrade by international rating agencies
PETALING JAYA: Despite the Covid-19 pandemic showing no signs of abating, the Malaysian banking sector as a bellwether of the economy is expected to hold up from being downgraded by international rating agencies.
Analysts and economists attributed this resiliency to the sector’s strong liquidity and capital buffers underpinned by the country’s strong fundamentals.
Commenting on the recent Fitch Ratings move to place the Malaysian banking sector on a negative rating outlook, AmBank Research banking analyst Kelvin Ong told StarBiz the sector would unlikely be downgraded, as it is still rated as stable by Fitch as banks still have sufficient capital and liquidity buffers.
KUALA LUMPUR (Jan 6): Rating outlooks have turned negative for banks in most jurisdictions this year compared to 2020, said Fitch Ratings.
In its 2021 Global Banks Outlook Compendium , the rating agency said this reflects downside risks to its baseline scenario from a potentially sluggish economic recovery following sharp deterioration in 2020 owing to the pandemic.
It said negative rating outlooks also reflect pressure on sovereign support-driven ratings.
“We expect asset-quality risks to crystallise in 2021 as government support measures for economies and borrowers are unwound, while an extended period of low interest rates will affect profitability.
“Pressure on ratings could increase if the economic downturn is more prolonged than we expect,” it said.
Banking stocks dominated the list of top losers this morning, after Fitch Ratings said the rating outlook for global banks has turned negative for 2021. At 9.41am, Hong Leong Financial Group Bhd declined 42 sen or 2.3% to RM17.82, making it the top loser this morning.
KUALA LUMPUR: The rebound seen on the local stock exchange yesterday proved short-lived as the market tumbled further on Wednesday amid growing pessimism over the rising number of coronavirus cases and the state of the global recovery.