Malaysia’s S&P Rating Holds Steady as Ringgit Edges Up and Stocks Fall

S&P Global Ratings has affirmed Malaysia’s A- long-term foreign-currency sovereign rating with a stable outlook, citing economic growth, monetary-policy flexibility and a record of current-account surpluses. The agency also warned that worsening political stability could put the rating at risk over the next 24 months, according to Free Malaysia Today.

The decision coincided with mixed trading on Tuesday, September 29. The ringgit edged higher against the US dollar, closing at 4.0790/4.0850 per dollar compared with 4.0805/4.0845 on Monday, according to figures reported by Free Malaysia Today. Malaysia’s benchmark FTSE Bursa Malaysia KLCI, meanwhile, fell 1.56% to 1,643.96, the outlet reported.

In a statement reported by Free Malaysia Today, Malaysia’s finance ministry said S&P’s stable outlook reflected an expectation that growth and the current policy environment would support steady fiscal performance over the next two to three years. A stable outlook indicates that the agency does not currently expect to change the rating; it is not a guarantee against a future downgrade.

S&P said the relative stability of Prime Minister Anwar Ibrahim’s administration had made policymaking more predictable after frequent changes of government between 2018 and 2022. It cautioned, however, that policy uncertainty could increase as the prospect of a general election draws closer. The agency said Malaysia’s institutions helped mitigate the risk of political instability, Free Malaysia Today reported.

The rating agency expects net general government debt to decline from 69.5% of gross domestic product in 2025 to 67.8% in 2026, according to Free Malaysia Today. It also flagged private-sector borrowing from abroad: total external debt stood at RM1.51 trillion (about US$370 billion at Tuesday’s closing exchange rate), or 70.1% of GDP, at the end of June. S&P attributed part of the increase to companies financing specialised IT and data-centre equipment.

S&P cited AI-related investment as one source of growth, while identifying the borrowing associated with some of that expansion as a potential pressure on the country’s external position, according to Free Malaysia Today.

Tuesday’s small currency gain did not carry over to equities. Rakuten Trade equity-research vice-president Thong Pak Leng told Bernama, as reported by Free Malaysia Today, that Brent crude at around US$107 a barrel was adding to inflation concerns, while technology shares remained under pressure. Selling in major banks also weighed on the Kuala Lumpur index, the report said.

US interest-rate expectations remained another consideration for currency traders. Bank Muamalat Malaysia chief economist Afzanizam Abdul Rashid told Bernama that higher US Treasury yields could make dollar-denominated assets more attractive. S&P’s affirmation supported sentiment toward the ringgit, according to Free Malaysia Today, but the currency’s move against the dollar was slight.