The new Outlook on Petronas' FC rating reflects the change in Outlook on Malaysia's FC rating earlier this month, as Fitch considers Petronas' FC rating to be constrained by that of Malaysia. However, Fitch does not consider Petronas' LC rating to be constrained by that of Malaysia. Accordingly, any upgrade of Malaysia's LC rating may not necessarily lead to a corresponding upgrade of Petronas' LC rating.
Fitch points out that Petronas' LC rating better reflects the company's fundamental credit qualities, and that if the sovereign constraint loosens over time, Petronas' FC rating should converge with its LC rating. Fitch notes the Positive Outlook on the latter is based on Petronas' continuing financial and operating strengths, which support the likelihood of an upgrade in the coming 18 months.
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