While lower oil prices are set to give many of Asia’s economies a fillip, Malaysia could face serious headwinds due to its heavy reliance on state-owned oil company Petronas.
“Malaysian bonds are all AAA rated because they’re guaranteed by oil money,” Jalil Rasheed, investment director at Invesco, said in an exclusive interview. “When Petronas says it’s going to pay lower dividends, it questions the ability of the government to finance some these loan obligations.”
He noted that Malaysia’s debt-to-gross domestic product (GDP) could be as high as 75 percent when contingent liabilities are included. Invesco has cut its exposure to Malaysia by around half to about 15 percent of its portfolio for Southeast Asia this year, Rasheed said.
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