No systemic risks from 1MDB saga

No systemic risks from 1MDB saga

KUALA LUMPUR - There is no systemic risk to the banking sector from the ongoing 1Malaysia Development Bhd (1MDB) saga.

RAM Rating Services Bhd chief executive officer (CEO) Foo Su Yin said the rating agency's forecasts had taken into account the ongoing 1MDB issue. She believes the issue will have no bearing on the sector.

"Despite the 1MDB matter, the banking system is still very strong and adequately capitalised and we still maintain our forecasts," Foo said at a press conference.

She said the price forecasts of the corporate bond market had also fully factored in the issue.

Meanwhile, RAM Holdings Bhd CEO Datuk Seri K Govindan said the negative undertones surrounding the weaker ringgit could actually be a silent trade-off for the wider economy.

"Ours being an export-oriented economy can gain on balance from any weakening of the ringgit. Sectors such as technology and chipmakers are poised to rally, as such exports would have a proxy to the story of the ongoing recovery of economies in the west," she said.

Foo said corporate results for the quarter ended March 31 have shown 'some kind of weakening', but noted that resilient firms would still be reporting strong results.

"From the companies that we rate, we do see some weakening but at the same time, some companies have also performed very strongly. It is a mixed bag, so to speak. But I think going forward, there will be challenges here and there," she said.

"Also in general, we do not think there are any major issues on the companies' ability to repay debt. Despite the challenging year ahead, we think a majority of the companies on our portfolio will still be on a stable outlook.

"There will be some on a negative outlook but it will not be a major portion," she added.

RAM expects the domestic corporate bond market to maintain its growth prospects this year, with a projected gross issuance value of up to RM85bil backed by funding requirements for key infrastructure projects under the Economic Transformation Programme.

The rating agency expects this year to be a challenging year for the domestic bond market on the possibility of persistently depressed oil prices, uncertainties looming over the direction of interest rates and lacklustre global growth.

On another matter, RAM Ratings' economist Kristina Fong expects gross domestic product to grow at 5.3 per cent this year, driven mainly by private consumption at home.

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