KUALA LUMPUR: Standard & Poor's Ratings Services says the depreciation in the Malaysian ringgit won't significantly affect rated Malaysian companies.
Standard & Poor's credit analyst Xavier Jean said on Thursday the weakening ringgit by itself “will have only a limited impact on the cash flow adequacy and operating performance of the eight companies that we rate in Malaysia".
In the report issued on Thursday entitled, "Why a weak ringgit won't significantly affect rated Malaysian companies," he said most of these companies have adequate rating headroom.
Jean pointed out these companies had moderate leverage, sound liquidity, and generally conservative financial policies.
S&P said the ringgit is nearing a 17-year low against the US dollar. Not only has the currency weakened by about 15% since the beginning of the year, the depreciation has been accelerating over the past few weeks.
The depreciation will have an overall modest effect on the leverage of the rated companies, but it could have a slightly pronounced impact on profitability for some.
What works in favor of the rated Malaysian companies is the absence of major mismatches between the currencies of their debt and their revenues.
The situation in Malaysia contrasts sharply with that in Indonesia, where the credit impact of the depreciation of the Indonesian rupiah on companies has been more pronounced.
"Although a prolonged weakness in the ringgit could bring the financial ratios of some companies close to their downgrade triggers, factors that companies control, including spending strategies, dividends, and acquisitions, will remain more important for the rating transitions," said Jean.
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