Arabian Gulf Business Insight reveals the top-rated sovereign wealth funds
• Fitch, S&P, Moody’s rate Abu Dhabi top in the GCC
• Saudi Arabia’s diversification helps score, but may be overinvested
• Bahrain and Oman are rated comparatively poor
Dubai, United Arab Emirates – 25 May, 2023: Arabian Gulf Business Insight (AGBI), a next-generation business news platform, today published findings by the three leading global rating agencies on the sovereign wealth funds (SWF) of the GCC.
UAE capital Abu Dhabi is the highest-rated sovereign in the GCC, while Bahrain and Oman are the only sub-investment grade credit ratings, according to the three major US agencies – Fitch, Moody’s and S&P Global.
All three ratings agencies use similar systems, although there are differences in the way their ratings are conveyed. In the Gulf, S&P is consistently more bearish and does not rate the United Arab Emirates at all.
S&P rates Qatar, Saudi Arabia and Oman below its two peers, although it has positive outlooks for Bahrain and Oman. Fitch, meanwhile, is a notch more positive on Kuwait.
A sovereign credit rating is an assessment of a country’s creditworthiness. It is applied to all bonds issued by a government. The ratings are important guides to institutional investors around the world who use them as benchmarks. Many pension funds, for example, are limited by their statutes to investing only in investment grade credits. A re-rating can move markets.
The outlooks attached to the ratings are also important because they indicate a likely re-rating.
Key highlights from the special report:
AGBI reveals that Abu Dhabi ranks as the highest-rated sovereign across the three ratings agencies. Moody’s says its Aa2 rating is underpinned by Abu Dhabi's strong balance sheet and its net creditor position. Similarly, Fitch’s AA rating reflects Abu Dhabi's high GDP per capita and strong fiscal and external metrics.
Earlier this month, Moody’s upgraded Saudi Arabia’s outlook to positive on the back of broad-based structural reforms and investments in a range of diversification projects. However, Fitch noted rising public sector spending outside the budget, including on ambitious giga-projects, and warned of the potential for higher debt of state-owned and government-related entities.