Moody's Issues Annual Sovereign Report On Malaysia

PRESS RELEASE: Moody's Issues Annual Sovereign Report On Malaysia

Thu Jun 17 02:10:08 2010 EDT

The following is a press release from Moody's Investors Service:

Singapore, June 17, 2010 -- Moody's Investors Service says in its latest
annual sovereign report that Malaysia's A3 sovereign credit rating has
been underpinned through the global crisis by its strong external
position, deep and liquid domestic capital markets, and a well managed
financial system.

The sovereign credit outlook is stable, and is adequately supported by
favorable expectations for economic performance and policy management, as
well as the government's efforts to liberalize investment laws and foster
competition so as to improve the country's growth model.

"Malaysia's strong liquidity and deep capital markets have ensured the
'finance-ability' of large fiscal deficits and 'affordability' of the
higher level of government debt that was ratcheted up by policy responses
to the external shocks of 2008-09," says Aninda Mitra, a Moody's Vice
President and author of the report.

While Malaysia boasts a well-diversified and reasonably competitive and
externally oriented economy, stabilization of the government's debt level
in the medium term requires stronger economic and fiscal reforms than
seen in the recent past, notes the report.

Consequently, the government's recent articulation of medium-term policy
goals of enabling greater domestic competition, fostering a
knowledge-driven economy, and achieving a higher income status -- as
contained in the "New Economic Model" -- represent its strong intent to
re-invigorate and re-balance the drivers of economic growth.

According to the report, however, a demonstrable commitment to specific
medium-term strategies that may better underpin its relative sovereign
credit fundamentals remains pending. In particular, the rationalization
and better targeting of fuel subsidies and the implementation of goods
and services taxes are both important.

Moreover, the abilities to heighten local competition and generate
greater domestic private investment are crucial. Such measures could
lift trend growth prospects as well as reduce the relatively large role
of the public sector in capital formation, it says.

Against the backdrop of sound monetary management and sophisticated
capital markets, sustainable improvements in Malaysia's growth
fundamentals and the government's fiscal performance would provide upward
rating pressure. On the other hand, the inability to retrench Federal
Government finances could weaken its debt dynamics and undermine investor
confidence, and result in downward credit pressure.

Entitled, "Credit Analysis: Malaysia", the report can be accessed at
www.moodys.com.

The principal methodology that Moody's uses in rating the Government of
Malaysia is 'Moody's Sovereign Bond Ratings Methodology,' published in
September 2008 and available on www.moodys.com in the Rating
Methodologies sub-directory under the Research