More downgrades than upgrades in 2017

PETALING JAYA: RAM Ratings, which saw more rating downgrades in 2017 as opposed to upgrades, expects the downward bias trend to continue into 2018.
It has a dim outlook on the media sector from which three out of the 10 rating downgrades came from.
The agency issued 10 downgrades in 2017 against five upgrades. In 2016, it recorded eight downgrades and three upgrades. Some 180 rated-entities were in its portfolio.
Its 20th instalment of its “Corporate Default and Rating Transition Study” noted that downgrades-to-upgrades ratio eased to 2.0 times in 2017 (2016: 2.7 times) amid higher number of rating upgrades relative to 2016.
While there were no defaults seen in 2017, the magnitude of downgrades remained relatively unchanged, averaging at 1.5 rating notches against 1.3 notches in 2016. This was still below the long-term average of 2.1 rating notches. From 1992 to 2017, the cumulative number of defaults stood at 51, with a combined rated programme value of RM13.2 billion.
“Despite still downward-bias rating actions, the overall credit quality of RAM Ratings rated portfolio is expected to remain intact. As at end-2017, some 82% of the portfolio (by programme value) or 137 out of 180 issuers carried at least AA ratings. This underscores the portfolio’s high credit quality due to the low risk of default associated with these ratings,” said RAM Ratings head of Data Analytics Julie Ng.
The agency expects overall rating actions to still remain downward biased in 2018.
As at end of 2017, the ratings of 14 entities either had a negative outlook or had been placed on Rating Watch, as opposed to four issuers which had a positive outlook.
However, the severity of forward rating actions is expected to be maintained or improved on the back of healthy economic growth and resilient corporate credit quality. The study covered a total of 589 corporations and financial institutions rated by RAM between 1992 and 2017.
On another note, based on RAM Ratings estimated pipeline anchored largely by financial institutions and infrastructure sector, bond issuance is expected to moderate to RM90 billion-RM100 billion in 2018.