Brexit Has No Material Effect On Malaysia’s Ratings Currently

KUALA LUMPUR, July 29 (Bernama) -- The United Kingdom (UK)'s decision to leave the European Union (EU) does not materially affect Malaysia’s respective gA2/stable and seaAAA/stable sovereign credit ratings. currently, on the global and ASEAN rating scales. In a statement, RAM Ratings said Malaysia was unlikely to face any extensive direct impact on its overall external demand from UK's decelerating economic growth as the latter only comprised over one per cent of its total exports. The ratings agency said Malaysia would likely face some portfolio outflows due to the 'flight to safety' effects in uncertain times. However, it said this could be offset by generally heightened portfolio investment, driven by the torrent of liquidity provided by the expansionary monetary policies of central banks in Europe and Japan. "This trend was observed during the European sovereign debt crisis, although investment flows then had been volatile as changes in investor sentiment had dictated the global flows of funds. "Aside from the European Central Bank, which is already in negative interest-rate territory, the Bank of England is widely anticipated to pursue further monetary stimulus to deal with the downside risks brought about by Brexit," it said, adding that Malaysia’s portfolio inflows were expected to increase on the back of these actions. Furthermore, foreign direct investment (FDI) from Europe (excluding UK) had consistently been a major source of foreign investment along with Japan and Singapore, said the rating agency. RAM Ratings added that net inward FDI from Europe (excluding UK) had been charting double-digit share between 2010 and 2014 while British investors had largely divested from the Malaysian market in the last six years. -- BERNAMA