SINGAPORE: Singapore’s Temasek and Saudi Arabia’s Public Investment Fund (PIF) have the strongest intrinsic credit quality among 11 government-owned investment holding companies (IHCs) rated, says Moody’s Ratings.
The rating agency explained in an Oct 17 report that while credit quality of a rated government-owned IHC is generally closely aligned with that of its government, intrinsic credit quality generally varies, as it is a reflection of the IHC’s standalone credit strength, excluding extraordinary government support.
The 11 companies assessed are headquartered primarily in the Middle East and Asia, and comprise Temasek, PIF, one IHC from Malaysia, one from Kazakhstan, two from Abu Dhabi, and five from China.
Temasek and PIF display superior credit metrics, excellent liquidity and diversified investment portfolios, Moody’s noted, adding: “Temasek’s excellent investment portfolio transparency provides greater visibility over market values and dividend income from investments, while geographic diversity reduces its exposure to localised economic downturns.”
The agency assessed that both companies have very low estimated market value-based leverage and high interest coverage.
“Temasek is the only company that is in a net cash position,” it added. “Its high-quality investment portfolio provides strong, recurring cash flow in the form of dividend income that also supports its robust credit standing.”
Meanwhile, PIF’s “excellent liquidity and low debt balance” bolsters its credit standing, with the fund’s capital sourced primarily from asset transfers, growth in retained earnings, debt borrowings and financial contributions from the Saudi Arabian government.
In the report, Moody’s also highlighted that at least half of Malaysian sovereign wealth fund Khazanah Nasional Bhd’s and PIF’s portfolios are in publicly listed investments.
A higher proportion of publicly listed investments provides stakeholders with a clearer, more immediate picture of the investment portfolio’s performance due to regulatory requirements and the availability of real-time valuation data.
Moody’s also said that the rated Chinese state-owned IHCs have public policy mandates set by their respective central, provincial or municipal governments. This typically influences the geographic diversity of their investment portfolios, which can affect their operations and financial risk profiles.
“Nonetheless, their ultimate credit quality benefits from a high expectation of extraordinary government support, reflecting their important policy roles,” Moody’s noted. — The Straits Times/ANN
