KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
In the second quarter of 2025, U.S. companies experienced their worst wave of credit downgrades since early 2021, with US$94 billion of high-grade debt downgraded — outpacing upgrades for the first time in over four years. The downgrade trend is setting off alarms across Wall Street, as investors begin to question whether corporate bonds are priced too optimistically given today’s economic uncertainty.
Key Stats That Matter
Downgrades: US$94 billion
Upgrades: US$78 billion
Fallen Angels (cut to junk): US$34 billion
Rising Stars (raised to investment grade): US$3 billion
High-grade bond spreads: ~0.8% (vs. 1.5% long-term avg)
High-yield bond spreads: ~2.8% (vs. 4.9% long-term avg)
“Credit picking is super important now. The vulnerability to downgrades is higher.”— Jon Curran, Principal Asset Management
Warning Signs Are Flashing
More companies are deferring interest payments. 9% of global high-yield borrowers are now paying interest in kind — nearly double the 2020 rate.
Cash reserves are shrinking. Even investment-grade firms are burning through their balance sheets.
Tariff risks are rising. President Trump’s threats of a 35% tariff on Canadian goods and escalating global trade tensions create an unpredictable backdrop for corporate profits.
“It’s not confirmed for a lot of businesses what their fate is.”— Christina Padgett, Moody’s
What the Pros Are Doing
Major funds like PIMCO are staying cautious — avoiding risk-heavy sectors like:
Metals & mining
Homebuilders
Autos
Retail
Instead, they’re leaning into:
Banks
Pipeline operators
Healthcare
Utilities
Defense
“We’re staying light in areas with high downgrade risk.”— Sonali Pier, PIMCO
But Market Signals Look… Complacent?
Despite the red flags, many investors are still optimistic:
Credit default swap positions show over US$105 billion in default protection sold (bullish sentiment).
Corporate bond yields remain attractive — though that may reflect past performance, not future resilience.
Final Take: Downgrades Are the Market’s Early Warning System
Corporate credit quality is starting to slip, even as many investors remain upbeat. With valuations stretched and uncertainty from trade wars, inflation, and slowing growth, this isn’t the time to be passive.
For investors:
Stay selective in bond exposures
Focus on free cash flow and earnings stability
Watch for downgrade momentum and fallen angels
Don't confuse high yields with low risk
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