Temasek, Saudi Arabia’s PIF rated highest for credit metrics and liquidity by Moody’s

SINGAPORE’S Temasek Holdings and Saudi Arabia’s Public Investment Fund (PIF) have the strongest intrinsic credit quality, among the 11 government-owned investment holding companies (IHCs) it rated, said Moody’s Ratings in an Oct 17 report.

The rating agency explained that while credit quality of the 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 primarily headquartered 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.”

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Meanwhile, PIF’s “excellent liquidity and low debt balance” bolsters its credit standing, with the fund’s capital primarily sourced 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 Berhad’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.

It 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.