MARC today published its 2014 Annual
Corporate Default and Rating Transitions Study which tabulates defaults and
changes in ratings of issuers rated by MARC over the years.
The year 2014 saw the divergence of monetary
policy between the United States and most of the rest of the world. As the US
Federal Reserve tapered its monthly bond-buying programme and ended it in
October, others could not take their feet off the monetary accelerator due to
weak growth prospects.
On the domestic front, low interest rates and
an influx of foreign liquidity in the aftermath of the Global Financial Crisis
(GFC) narrowed corporate bond spreads as yield-hungry investors increased their
demand and risk appetite for lower-rated bonds. Consequently, Malaysian
corporates (particularly those from the non-financial sector) raised their
leverage positions.
A total of 60 issuers (excluding structured
finance and short-term paper issuers) were in MARC’s rating universe at the
beginning of 2014, with 51 issuers rated in the high-grade segment while the
remaining were high-yield issuers.
The dust from the GFC continued to
cloud business sentiment in 2014. As before, the industrial products sector was
the hardest hit with the highest downgrade rate, followed by the trading &
services as well as property sectors. Four ratings were downgraded in the year
(five in 2013), a reflection of the Malaysian economy’s improved growth. And
just like in 2013, there was one default and no upgrade action in 2014, making
it the year with the
least rating migration since 2002.
As such, MARC’s downgrade rate fell slightly to
6.7% in 2014 (2013: 7.8%), just a hair’s breadth above the long-term average
rate of 6.6%. Meanwhile, MARC’s rating stability improved to 91.7% (2013:
90.6%), the highest since 2002 which exceeds even the 2000-2014 average of
83.9%. MARC’s one-year accuracy ratio also improved, rising to 98.3% in 2014
from 63.5% in 2013.
As expected, an analysis of MARC’s rating
migrations showed a positive relationship between rating and stability over the
long term (1998 – 2014). For instance, after adjusting for withdrawn issuers,
high-grade issuers displayed a higher level of rating stability (93.5%)
compared with high-yield issuers (77.4%). Among high-grade issuers, the
AAA-rated category displayed greater rating stability of 98.8% (AA-rated
category: 93.0%), indicating the relative stability of these rating categories.
Going forward, MARC envisages negative rating
activities to continue outpacing positive ones in view of rising leverage among
corporations, in particular those with substantial foreign currency debt.
Factors that could limit positive rating actions include continuing ringgit
vulnerability and potentially higher financing costs. We, however, expect
corporate defaults to stay low in 2015.
For a full
copy of this report, please click here.
Warm
regards,
Malaysian
Rating Corporation Berhad (MARC)
Tel : +603 2082 2200 | Fax : +603 2093 3962
Email : marc@marc.com.my
Website : www.marc.com.my
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.