MARC’s corporate bond issuers portfolio remained steady in 2020


THE Malaysian Rating Corp Bhd (MARC) said its portfolio of corporate bond issuers remained steady in 2020 with the rating stability remaining high, downgrade rate remaining constant and no defaults being recorded.

The rating agency reported a stability ratio of about 95.7%, similar to that in 2019 and higher than the long-term average of 87.2%, despite the slump in economic growth due to the Covid-19 pandemic.

“This was due to the high concentration of high-grade corporates in MARC’s portfolio, representing 91.4% of total corporates in 2020 compared to 91.3% in 2019.

“Although there has been some weakening in their credit profiles, they retained sufficient headroom in their respective ratings,” it noted in its 2020 Annual Corporate Default and Rating Transitions Study report released yesterday.

MARC said its corporate portfolio experienced three downgrades in 2020 with the downgrade rate remaining constant at 4.3%, below the long-term average of 5.9%.

It noted that the downgrades were mainly due to pre-existing industry-specific overcapacity issues and project delays being exacerbated by the Covid-19 pandemic and subsequent lockdown measures.

It added that there were no upgrades nor defaults recorded in 2020.

“For three years in a row since 2017, there were no defaults recorded in MARC’s rating universe.

“The long-term annual corporate default rate for the 2000 to 2020 period fell to 1.8% against the 1.9% for the 2000 to 2019 period,” the agency said.

Additionally, MARC said a further breakdown shows high-grade and high-yield long-term default rates easing to 0.7% and 7.7% respectively for the period.

It added that MARC’s rating accuracy continued to exhibit improvement.

MARC uses the cumulative accuracy profile (CAP) as a measure of rating accuracy to analyse the effectiveness of its ratings in predicting defaults across several time horizons.

For the 1998-2020 period, MARC’s one-year ratings accuracy ratio rose to 70.1% compared to 69.4% for the period of 1998 to 2019  due to the absence of high-grade defaults since 2014.

Its one-year ratings accuracy ratio over the period of three and five years until 2020 stood at 81.6% and 98.2% respectively against 77.0% and 98.2% in 2019.