Bangkok--22 Jun--Moody's Investors
Moody's Investors Service has assigned a provisional foreign currency rating of (P)A3 to the securities under Malaysia's proposed U.S. dollar-denominated sovereign sukuk.
RATINGS RATIONALE
In Moody's opinion, the payment obligations represented by the securities available on offer are pari passu with other senior, unsecured debt issuances of the Government of Malaysia and thus justify a rating at the same level. Moody's expects to remove the provisional status of the rating upon the closing of the proposed issuance and a review of its final terms.
The Malaysian economy has grown robustly during the recovery from the global financial crisis, supported notably by healthy private consumption and government stimulus. In addition, the pickup in growth across the region and higher commodity prices have bolstered Malaysia's large export sector. Yet inflation remains relatively low and such pressures are being kept in check by central bank policy actions. Despite headwinds from supply-chain disruptions from the March 2011 Japanese earthquake and from a moderation in Chinese demand, Malaysia's growth will continue to be supported in the near-term by domestic demand, particularly as investment spending accelerates under the government's Economic Transformation Programme.
Malaysia's sovereign rating is anchored by the sustained strength in the country's strong external payments position, high savings rates, and deep onshore capital markets. Official foreign exchange reserves stand atUS$32.7 billion, or more than four-times residual short-term external debt, as of end-May 2011. In addition, the rating is supported by strong and well-managed corporate and banking sectors, which poses only marginal contingent liabilities to the government's balance sheet.
However, structural features of the Malaysia's fiscal framework may put pressures on the long-term sustainability of public finances. The government continues to be reliant on commodity revenues, while expenditure growth has been driven by a ballooning of the subsidy bill.
Tax and subsidy reforms will be needed to better underpin Malaysia's sovereign credit fundamentals relative to its peers.
The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.
Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.