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 noted that the relative stability of Prime Minister Anwar Ibrahim’s administration had made policymaking more predictable after frequent changes of government between 2018 and 2022. However, it cautioned that policy uncertainty could increase as the prospect of a general election draws closer. The agency stated that Malaysia’s institutions helped mitigate the risk of political instability, according to Free Malaysia Today.

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 specialized IT and data-center 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.

In contrast, Philippine media reported a more pessimistic outlook for their markets. The Philippine Stock Exchange index (PSEi) fell to its lowest level for the year, closing at 5,679.48, a decline attributed to concerns over economic growth and inflation, as reported by Manila Times. The index dropped 58.92 points, or 1.03 percent, marking the third consecutive session of losses.

Philippine analysts highlighted the potential impact of a severe El Niño on public infrastructure spending early next year, which they believe could exacerbate existing economic challenges. The Bangko Sentral ng Pilipinas’ warning that inflation could accelerate to as high as 7.4 percent in September from 6.1 percent in August has further fueled investor anxiety, according to Manila Times.

While Malaysian coverage stressed the stability of its political framework, Philippine outlets framed the situation as one of rising economic uncertainty, with analysts pointing to elevated US Treasury yields and a weakening peso as contributing factors to the market's decline. The peso weakened for a third straight trading day, closing at P62.64, further complicating the investment landscape in the Philippines.

Trading in the Philippines saw net foreign selling of P2.85 billion in local equities, which added to the downward pressure on the market. In contrast, Malaysia's S&P affirmation was seen as a supportive factor for the ringgit, even though the currency's move against the dollar was slight.

US interest-rate expectations remained another consideration for currency traders in both countries. Bank Muamalat Malaysia chief economist Afzanizam Abdul Rashid told Bernama that higher US Treasury yields could make dollar-denominated assets more attractive. Meanwhile, Philippine analysts noted that the continued rise in long-term US Treasury yields and the weak peso were weighing heavily on local shares.

Overall, while Malaysia's stable rating and slight currency gain suggest a cautiously optimistic outlook, the Philippines faces significant challenges that have led to a more negative sentiment in its markets.