Standard & Poor’s has cautioned that Malaysia could join India and Japan which may have lower sovereign ratings because they have yet to come out of the 2008 economic meltdown.
JUST when we figured the winds of fury have abated along with the tsunami and earthquake which rattled Japan in March, one of our significant trading and industrial partners, comes another shock.
The reverberations across global equity markets following Standard & Poor’s sovereign downgrade of the US are still being felt and the aftershocks are being expected in the US (depending on how the US Federal Reserve will react next week) and elsewhere.
Malaysia enjoys an “A3” sovereign rating from Moody’s while it is ranked an “A-” by S&P.
On Thursday Fitch Ratings affirmed Malaysia’s sovereign ratings with a stable outlook but expressed its concern about the structural weaknesses in the public finances as well as over dependence on petroleum-linked revenues.
In the case of S&P, it has also cautioned that Malaysia could join the ranks of countries like India and Japan, which may have lower sovereign ratings because they have yet to come out of the 2008 economic meltdown.
Although Malaysia may have a low percentage of US Treasuries unlike many other Asian economies, the economy is closely tied to that of the US.
One economist estimated that a 1 per cent fall in the US growth would reduce Malaysia’s GDP growth by about 0.8 per cent during a downturn. But the negative impact could also blow up to about 1.6 per cent should the US undergo a recession.
On Wednesday, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz will most likely announce growth numbers which are weaker than the 4.6 per cent which the Malaysian economy saw in the first quarter.
Zeti will also give her take on the impact of the downgrade on the Malaysian financial market scene.
So far, the market has reacted saying it could be a knee-jerk reaction and that the ringgit may see an appreciation to RM2.90 to the US dollar but the central bank is also more likely to intervene to ensure “orderliness”.
JUST when we figured the winds of fury have abated along with the tsunami and earthquake which rattled Japan in March, one of our significant trading and industrial partners, comes another shock.
The reverberations across global equity markets following Standard & Poor’s sovereign downgrade of the US are still being felt and the aftershocks are being expected in the US (depending on how the US Federal Reserve will react next week) and elsewhere.
Malaysia enjoys an “A3” sovereign rating from Moody’s while it is ranked an “A-” by S&P.
On Thursday Fitch Ratings affirmed Malaysia’s sovereign ratings with a stable outlook but expressed its concern about the structural weaknesses in the public finances as well as over dependence on petroleum-linked revenues.
In the case of S&P, it has also cautioned that Malaysia could join the ranks of countries like India and Japan, which may have lower sovereign ratings because they have yet to come out of the 2008 economic meltdown.
Although Malaysia may have a low percentage of US Treasuries unlike many other Asian economies, the economy is closely tied to that of the US.
One economist estimated that a 1 per cent fall in the US growth would reduce Malaysia’s GDP growth by about 0.8 per cent during a downturn. But the negative impact could also blow up to about 1.6 per cent should the US undergo a recession.
On Wednesday, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz will most likely announce growth numbers which are weaker than the 4.6 per cent which the Malaysian economy saw in the first quarter.
Zeti will also give her take on the impact of the downgrade on the Malaysian financial market scene.
So far, the market has reacted saying it could be a knee-jerk reaction and that the ringgit may see an appreciation to RM2.90 to the US dollar but the central bank is also more likely to intervene to ensure “orderliness”.
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