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.