KUALA LUMPUR: The Malaysian economy, its corporate sector and the banking system are well-positioned to withstand any systemic risks should the global economy worsen, said Maybank Group president and chief executive officer Datuk Abdul Farid Alias.
Disagreeing with some analyses by foreign research houses that asset quality in Malaysia could potentially be as bad as during the 1997 financial crisis, he said stress tests conducted by Maybank equity strategists indicated otherwise.
Citing a Maybank Kim Eng Research report in September, Farid said several public-listed companies in each Southeast Asian country and China were tested against interest rate and cash flow shocks, and Malaysia “is strong”.
“From a country perspective, Malaysia, India, Thailand, Singapore and Vietnam showed resilient metrics. China and Indonesia appeared vulnerable. Sector-wise, there are signs of vulnerability in consumer and real estate,” wrote the report’s authors Sadiq Currimbhoy and Willie Chan.
The report, “UnMasking Asia: I So Wanna Be Resilient”, is part of a series of reports stress testing the resilience of earnings, cash flows and balance sheets of corporates across Asian countries and sectors.
In an interview with the New Straits Times Press conducted on the 48th floor of the group’s headquarters in Jalan Tun Perak, Farid said as a financial institution, Maybank’s primary function was to help the economy grow but, at the same time, help contain sectors that posed risks to the economy.
“Those sectors that need to be a bit more careful, we should play our role to make sure that their growth is more modest. If we don’t think of anything else other than just growth... one day it may just blow (up), and affect the entire economy,” said the 47-year-old banker.
Farid, who is also chairman of the Association of Banks Malaysia, said this responsibility was common to all banks in Malaysia.
“Bank Negara is also very proactive when it comes to this.”
Sporting the familiar black and yellow Maybank corporate tie, he said history had also shown that foreign “experts”, in particular, could be wrong in their analyses and predictions.
“When exchange control was introduced in Malaysia in 1998, everybody was saying ‘This is stupid. What are they doing?’ Many of these same financial experts are now saying ‘When you have this problem, you have this solution (exchange controls).’
“So here’s the thing. We are not in a world of natural science where cause and effect is very clear. When we deal with social sciences, what we have are models that deal with correlation to infer cause and effect. We don’t have all the answers,” added Farid, who has over 20 years of experience in investment banking and capital markets.
Nevertheless, Malaysia’s No. 1 and Asean’s No. 4 bank continues to monitor leading economic indicators and key sectors for any signs of trouble, and is exercising more care in its credit underwriting processes.
“We are watching that space, obviously. As external demand slows, the leading indicators of the economy, some of them are slowing while some are improving, as shown by the economic data for October.
“In this market, we can pick and choose the segment that will give us better asset quality at the end of the day. From the statistics that we see, we don’t see anything systemic at this point of time, but we are monitoring,” Farid said.