Who cares what Fitch thinks? Why have the media been giving so much publicity to rating agencies such as Standard & Poor’s, Moody’s and Fitch Group (the so-called Big Three)?

On 20 January 2015, Fitch rating agency said it was “more likely than not to downgrade the rating of the sovereign (Malaysia)” in the coming months. On 17 March, Fitch issued another statement saying there was more than a 50 per cent chance of a downgrade by the end of June.

On 8 June, a Minister in the Prime Minister’s Department confirmed that the government had held meetings with Fitch over its negative outlook. What transpired at the meeting with Fitch?

Finally, on 30 June, Fitch announced there was no downgrade and instead maintained its A- and A ratings and even improved its outlook from negative to ‘stable’.

Here’s why ordinary Malaysians should not heed the Fitch ratings as a measure of the state of the economy and our wellbeing.

First, these ratings are for the benefit of bond issuers and investors – not for ordinary Malaysian workers

Don’t take my word for it. This is what is written on the Fitch website: “…Fitch Ratings offers global perspectives shaped by strong local market experience and credit market expertise. The additional context, perspective and insights we provide has helped investors fund a century of growth and make important credit judgments with confidence.”

We should also follow the money trail: who pays the rating agencies? Their clients. That will tell you whose interests they serve. Rating agencies are usually paid by the issuers of the bonds and shares they rate. So chances are, they can’t rate them too negatively as the issuers can go elsewhere.

Full article on the Aliran website

Please help to support this blog if you can.

18 COMMENTS

  1. Shortlived relief from Fitch as Ringgit resumes its downward spiral today vs USD.

    ING Groep NV forecasts the ringgit will weaken further and sees a year-end exchange rate of 3.85 amid the “political noise” that’s adding to the already-under pressure trade account, Tim Condon, head of Asia research in Singapore, wrote in a July 3 report. Barclays Plc and Credit Suisse Group AG predict 3.88 and 3.83, respectively.

  2. This quote on rating agencies is in no way an approval of Bolehland economics, which the public only knows too well.

    “After being so far off the mark in these difficult times, do the all-important financial rating agencies have any credibility? Before the giant AIG collapsed, S&P rated it AA+. Despite committing trillions of dollars to bail out failed businesses, the US Government itself remains at the topmost AAA rank, as it has ever since the 1st agency was set up in 1917. Japan, Germany, UK, Australia and NZ also retain AAA status despite their parallel troubles. Yet countries with the largest reserves and best balance sheets are rated lower: China and Malaysia get only A+, while South Korea gets the higher AA, the same as Israel which is endangered by war.” – P Gunasegaram, in TheStar, 2009

  3. 1MDB wishes to make clear, with reference to media reports published on Friday, that the company has never provided any funds to the Prime Minister. “To suggest otherwise, as some media outlets have done, is highly irresponsible and a deliberate attempt to undermine the company.”

    The company expressed surprise that “documents such as these, whose existence and authenticity have not been publicly verified”, continue to be used as a basis to create new unsubstantiated allegations against 1MDB.

    According to press reports, the company claimed in a statement, “these documents were found to have been tampered with, and were being used by an individual – who is currently under arrest in a foreign country – to extort and blackmail his former employer”.

    http://www.freemalaysiatoday.com/category/nation/2015/07/03/1mdb-denies-channeling-funds-to-najib/

  4. ‘For the first time I will be crossing for BN in the next GE’.

    You were still with the DAP during GE13?

  5. Ah, in that case Malaysia can trust nobody ! BTW, what about WSJ and Sarawak Report and also Xavier Justo later on ?
    We are now in catch 22, deep blue sea and the devil !?

  6. Wall Street Journal (WSJ) today reported that Malaysian investigators have traced nearly US$700 million of deposits into what they believe are personal bank accounts of Prime Minister Najib Abdul Razak.

    • Another articles that come without substantial evidence. I wonder whether its has been doctored, tampered or fabricated.

      • The investigators’ findings apparently were leaked, possibly through former Prime Minister Mahathir Mohamad, who has been on a two-year crusade to drive Najib from office and put him in jail.

    • Only dunggu will believe in such stories from WSJ. If the PM had wanted to divert the money to his account, surely he would not be so stupid to deposit it into his bank account in KL. He would deposit it into the Swiss bank or some off shore bank in the Carribean

    • Strange that Zahid and IGP dare not arrest Tun M as Najib has said that Tun M is responsible for this leak to WSJ.

  7. Fitch or Bitch, it is a quasi marketing & PR agency for its clientele.
    The created perception sans realistic assessment of sovereigns / countries is more to promote its self interests esp since the Rise of Asian Tigers Phobia. Massive movement of capitals can be ‘manipulated’ via panic knee-jerks of investors who view its ratings as heaven sent & absolute truth to every word from the New York office.
    Time for Asia to get its act together to promote its own self-interests & elect the Renminbi as Asia-global currency of exchange. And we will see what kind of a bitch reaction from this New York office of the Bitch.
    When this Bitch eyes our massive EPF fund as a ready standby collateral in the event of a default of 1MBD, what do you think this agency has in mind for Malaysia? Economic colonisation, my dear Malaysians.

  8. This statement by Fitch should cause outrage amongst all right-thinking Malaysians:

    Fitch: “local agencies such as Employee Provident Fund (EPF) can provide funding to support to the sovereign in the event of a sell-off by non-residents.”

    Translation: the 1Malaysia regime should use your hard-earned EPF retirement savings to prop up the stock and bond markets if foreigners get nervous and take their capital out.

    • Epf has for the past decade has been investing in the local and foreign stock market and bonds. Nothing unusual. And they have done quite well considering the fact that every year it has given out high dividend to it’s members. To say that it coffer has been raided is very malicious

      • To you, there is no difference between investing in soundly run companies
        and using our EPF funds to prop up the stock prices of badly and
        corruptly mismanaged companies and so-called “sovereign wealth funds”?

        Ever heard of “throwing good money after bad”?

      • Remember that gold trading scam that has given out high dividend to it’s members, before being exposed?

    • In US, the people have freedom of speech, democratic movements (people’s power), own guns & even tanks, & are more educated in the process of law. Do you think Fitch will dare to advise President Obama to take away social securities (such as unemployment benefits, food stamps) or “korek” the 401K Fund should US default on its national debts?
      Rating others from offshore is a safe compulsion without responsibility at all to sovereign countries except to destroy others at moments of ill opportunities.
      Citizens’ retirement fund saved from blood, sweat & tears are not ready-collateral for national debt-rescue & that Bitch (of a Fitch) should be educated on private fund management theory & practice.

  9. Opposition and their supporters are just an obsessive bunch opposing just for the sake opposing. When the rating agency make an unfavourable rating and down grade, they are happy. You see we are right. But when the agency have a good report, they start pounding on the agency calling them name and all sort of negative remarks saying they have been brought. Rating are independent. I have always been a strong supporter of DAP but after seeing their twist and turn, lies and deception I finally.said enough is enough of all their bull … and nonsense. For the first time I will be crossing for BN in the next GE. In coffee and public you can see that the people are disappointed and disillusion with Pakatan DAP, Pkr and Pas. The swing back to BN is now gaining momentum

LEAVE A REPLY

Please enter your comment!
Please enter your name here