KUALA LUMPUR, Nov 13 — RAM Rating Services Bhd has kept the outlook on most of the sectors under its coverage as stable despite challenges such as decelerating economic growth, weak commodity prices and highly uncertain global trade conditions following the protracted US-China trade spat.
Besides that, it said the Pakatan Harapan administration, mid-way through its second year in power, has set fresh policies for certain regulated industries, where affected players need to adapt to the new regulatory environment.
Head of corporate ratings Thong Mun Wai said only two out 10 of the selected sectors were kept on a negative outlook, namely the automotive and commercial property sectors.
He said the outlook on the construction and oil and gas (O&G) support services sector has been revised from negative to stable, premised on improving industry fundamentals.
“The prospects of the O&G support services sector have been looking up as Petronas ramps up its capital expenditure (capex),” he said in a statement in RAM’s CreditPulse 2019/2020.
The credit rating agency expects competition in the automotive sector to intensify amid a saturated market and uncertain policy direction, compounded by the anticipated weakening of the ringgit, which will erode margins even further.
For the commercial property sector, it said the glut of office and retail mall space is unlikely to ease anytime soon as supply is still envisaged to outpace demand in the medium term.
RAM placed the construction sector on a negative outlook in 2018 due to the cancellation, deferral and review of mega infrastructure projects after the 14th general election.
While construction activity is expected to remain lacklustre through the rest of 2019, RAM anticipates it to pick up next year once revived infrastructure projects such as the RM44 billion East Coast Rail Link (ECRL) gain traction.
Meanwhile, head of research Kristina Fong said Malaysia’s gross domestic product growth is projected to come in at 4.5 per cent for 2020, a tad lower than the 4.6 per cent expected this year.
“Once again, domestic demand will be the key anchor of growth as external demand continues to wane.
“The use of growth-supportive policies next year will be of utmost importance towards facilitating domestic demand as the main catalyst of economic expansion,” she said.
The credit trends of RAM-rated issuers in the selected sectors are stable.
The issuers in its rating portfolio predominantly fall into the AA category and possess features that insulate them against sectoral challenges, for instance dominant market positions, strong earnings visibility, business diversification and/or sturdy financial profiles. — Bernama