Oil rally fails to allay concerns over Malaysia

Kuala Lumpur

FITCH Ratings have said that an oil rally that helped make Malaysian bonds Asia's best performers over the past three months hasn't allayed concerns over the nation's deteriorating finances ahead of a second-quarter review.

Malaysia's fundamental picture remains clouded by a shrinking current account surplus and the buildup of "contingent liabilities" for the government related to state investment company 1Malaysia Development Bhd, Andrew Colquhoun, Fitch's head of Asia Pacific sovereign ratings, said in a phone interview from Hong Kong on May 7. He warned in March that there was more than a 50 per cent chance of a credit downgrade.

"I don't think the rating view will be driven by relatively small changes in the oil prices," said Mr Colquhoun. "We've had a negative outlook of the credit since the middle of 2013. The view since then has been that the changes in Malaysia's macroeconomic fundamentals have left the credit more exposed…