KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) portfolio of corporate bond issuers remained steady in 2020, with stability ratio of about 95.7 per cent, despite the slump in economic growth due to the Covid-19 pandemic.
According to the rating agency's 16th annual corporate default and rating transitions study, the rate was similar to that in 2019 and higher than the long-term average of 87.2 per cent.
This was due to the high concentration of high-grade corporates in MARC's portfolio, representing 91.4 per cent of total corporates in 2020 as compared to 91.3 per cent in 2019.
"Although there has been some weakening in their credit profiles, they retained sufficient headroom in their respective ratings," it said in a statement today.
MARC said its corporate portfolio experienced three downgrades in 2020 with the downgrade rate remaining constant at 4.3 per cent, below the long-term average of 5.9 per cent.
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.
There were no upgrades nor defaults recorded in 2020, MARC added.
MARC said for three years in a row since 2017, there were no defaults recorded in MARC's rating.
The long-term annual corporate default rate for the 2000-2020 period remained fell to 1.8 per cent compared to 1.9 per cent for 2000-2019 period.
Meanwhile, MARC said its 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 per cent due to the absence of high-grade defaults since 2014.
"Meanwhile, MARC's one-year ratings accuracy ratio over the period of three and five years until 2020 stood at 81.6 per cent and 98.2 per cent as compared to 2019 at 77.0 per cent and 98.2 per cent respectively," it said.