Although Malaysia is keeping its current credit rating, an analyst with the rating agency Moody’s Investors Service said the government’s handling of the 1MDB issue is below par.
“The government’s handling of 1MDB isn’t as transparent as we would have hoped or expected, for a sovereign for its current assessment of its institutional strength,” said the agency’s senior analyst Christian de Guzman.
de Guzman (photo) said this when asked at a press conference in Kuala Lumpur today to comment on the government’s handling of 1MDB, as to whether it is harming investor confidence.
During the afternoon conference, he declined to respond on several questions related to 1MDB, saying that he can’t answer them due to “significant degrees of opacity” over the investment fund.
One question was whether the various investigations on 1MDB and a restructuring exercise is a positive or negative development for the fund, while another asks what needs to happen to 1MDB before the agency believes that a downgrade of Malaysia’s sovereign rating is warranted.
Malaysia in the bottom echelon
Malaysia is given an A3 positive rating by the agency, meaning that its credit rating is deemed “to be upper-medium grade and subject to low credit risk”, and is likely to improve in the medium term.
The number ‘three’ denotes that Malaysia is in the bottom echelon of the A-category, which in turn is below the AAA and AA ratings, but above six other ratings ranging from BAA to C.
On Monday, PKR’s Kelana Jaya MP Wong Chen (photo) differed from his Pakatan Rakyat colleagues by saying that 1MDB would not destroy Malaysia’s economy even if it fails to repay its entire RM42 billion debt.
Instead, he argued in Parliament that the government’s handling of 1MDB is affecting investor confidence, which would have a negative impact on the economy.
Meanwhile, de Guzman acknowledged that many worried investors have been seeking Moody’s opinions about 1MDB, but dismissed it as “all sentiment (driven)”.
“The 1MDB issue is not systemic for public finances, not for the economy, nor the banking system […] But it does seem to have a disproportionately large effect on the political situation.