KUALA LUMPUR (April 27): Khazanah Nasional Bhd has been assigned an issuer credit rating of A3 by Moody’s Investors Service and A- by S&P Global Ratings.

The investment grade credit rating reflects Khazanah’s strong ability to meet its financial commitments, track record of sound investment and funding policies, and important role in growing Malaysia’s long-term wealth, the national sovereign wealth fund said in a statement on Thursday (April 27).

“The international credit rating will further enhance Khazanah’s attractiveness as an issuer and expand its global investor base,” it added.

Moody’s A3 long-term issuer rating incorporates its Baseline Credit Assessment (BCA) of baa3 and expectation of very high likelihood of extraordinary support from the Malaysian government if required, according to Moody’s vice president and senior analyst Maisam Hasnain.

“Khazanah's baa3 BCA is underpinned by its: ownership of large stakes in Malaysian corporates that have leading market positions and strong business profiles; track record of conservative financial policies with respect to investment and funding decisions, and its public articulation of operating within target leverage levels; close coordination with the Malaysian government and government-owned entities; and strong access to external funding,” the credit rating agency said.

However, Moody’s notes that Khazanah’s investments are skewed towards Malaysia, with public and private Malaysian investments representing at least 65% of its portfolio. 

“Moody’s expects Khazanah to continue rebalancing its portfolio to achieve its long-term strategic asset allocation targets, thereby reducing its exposure to concentration risks,” Moody’s said.

“While such a strategy could increase its net investments (aggregate investments less divestments) over the next few years, Moody’s expects Khazanah to take a conservative approach toward growth and diversification, including adhering to its publicly articulated long-term leverage target,” the fund continued, adding it expects a maintained market value-based leverage of 30% to 35% over the next two years.

Commenting on the rating rationale, Khazanah recognised that its standalone credit strength is moderated by its portfolio’s high geographic concentration and exposure to market volatility. To address this, the fund said it expects to continue to diversify its investments and reduce exposure to concentration risks. 

Besides rebalancing its portfolio, Khazanah managing director Datuk Amirul Feisal Wan Zahir said the fund’s focus also remains on creating value for Malaysia.

“Completing the portfolio transition and systematically paring down debt is important to strengthen Khazanah’s balance sheet enabling us to fulfil its mandate of Advancing Malaysia,” he added.