Debt issues considered non-prime, or having "doubtful capacity for timely payment on short-term obligations", have risen by 62.5 per cent since the crisis broke last July, Rating Agency Malaysia (Ram) said.

The number in the "high investment risk" category has gone up to 39 from 24 before July 1997.

The designation does not mean the debt issuer will fail, but it raises a warning on companies "which we believe on a stand-alone basis" could default on loans, Ram general manager Suresh Menon told Reuters in an interview.

The stand-alone assessment is without taking into consideration bank guaranteed loans.

In recent weeks, the Malaysian financial markets have been abuzz with rumours of companies going bust.

Some dealers have been circulating lists of firms believed to be in financialdistress, leading a dozen to issue denials on Monday that they were on the verge of failing.

Another two said they each had a subsidiary in receivership. The flurry of speculation came after construction firm Wembley Industries Holdings Bhd was put into receivership over about 130 million ringgit ($34.67 million) in loans.

The Asian economic crisis, triggered last July by the devaluation of the Thai baht, has stalled Malaysia's booming growth.

Growth of gross domestic product, adjusted for inflation, could slow to 0.9 per cent this year from an estimated 7.6 per cent annual rate in 1997, influential think-tank the Malaysian Institute of Economic Research (MIER) said on Tuesday.

"We review ratings annually...But from last year, we had the situation where annually is not enough," Menon said.

"In the case of stockbroking companies, now we look for information every two weeks," he said.

Banks, which had been reviewed once every six months, are now being assessed every quarter, he said.

From July1997 to April 15, 1998, Ram downgraded 73 out of 216 debt issues it reviewed. It upgraded just nine and affirmed ratings on 134, Menon said.The 216 issues represented more than 60 per cent of the issues Ram typically analyses, Menon said. The agency focused first on assessing industries seen as the most vulnerable.

"Property, construction, stockbroking, banks...those were our main priorities," he said.

Of the 73 issues downgraded, the biggest number, 17, were from diversified holding companies. Financial services debt issues were tied with property and real estate each at 15 issues.

"Liquidity is a major crisis," Menon said. "Even viable companies are now getting into trouble because there's no money in the system."

He said company debt troubles were putting pressure on already weakened banks since much of the paper carried bank guarantees.

"When the banks guarantee it, the risk passes onto the banking system again...We see a lot of non-investment grade papers which have been guaranteed by thebanks," he said.

"What was a contingent liability or off-balance sheet item has now become transferred to an on-balance sheet item because of the crystallisation of the guarantees," he said.

Ram is the country's main debt rating agency with a mandate to assess all corporate debt issues. The agency, whose shareholders are financial service companies, has just one local rival, the Malaysian Rating Corp.