7Jan
SGX

S&P: Sovereign downgrades likely to outpace upgrades this year

SINGAPORE:

  • Sovereign downgrades are likely to outpace upgrades in 2016, says Standard and Poor’s (S&P).
  • In its “Global Sovereign Rating Trends 2016” report, the ratings agency said that among the 131 sovereigns it rates globally, 25 had negative outlook against eight that were positive as of Dec 31, 2015.
  • “The outlook balance, positive minus negative outlooks, has dropped to minus 17 from the seven-year high of minus 4 in June 2015,” said S&P chief rating officer for sovereign ratings, Moritz Kraemer. “This constitutes the most negative six-monthly swing in the outlook balance since December 2008.”
  • In December 2015, S&P maintained Malaysia’s rating outlook at A- and stable, despite domestic and global developments.
  • Developments over the past year, ranging from the controversy surrounding state fund 1Malaysia Development Fund (1MDB), China’s policy shift and oil prices have not affected Malaysia’s economic prospects and fiscal balance sheet, S&P’s sovereign and international public finance ratings senior director Kim Eng Tan said.
  • “The key risk is political risk and even that has moderated,” Kim said, adding that growth projection remains robust with the sovereign rating agency expecting more than 4% this year and next.
  • Malaysia’s gross domestic product (GDP) expanded moderately by 4.7% in the third quarter of 2015.
    Malaysia’s fourth quarter and 2015 full-year GDP numbers will be announced in February.
  • S&P said the outlook distribution suggested that negative rating actions are likely to continue to outnumber positive actions over the coming 12 months.

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