Global Versus National Scale Ratings
There are global or international rating agencies and there are domestic and national rating agencies. Global rating agencies are rating agencies like Standard & Poor’s, Moody’s, and Fitch. They rate issues and issuers in different countries and likewise rate sovereigns. The rating of the sovereign in which a particular company operates impacts heavily on the actual rating that is given to the company being evaluated. Each issue or issuer is then compared to all issues and issuers rated globally.
Domestic or national rating agencies have a more specific coverage — rating issues and issuers in the country in which they operate. Each issue or issuer is then compared to all issues and issuers rated nationally or domestically.
The best way of explaining the difference between the two types of ratings done is by an analogy. Let us say that you are best badminton player in the Philippines. Of all the players in the Philippines, you are ranked number 1. No one can beat you here in our country. You go out though and compete in the international scene. There, you may only be ranked no. 10 or no. 20. You may be the best in the Philippines but only above average globally. The standards are different. The scales are different.
In effect, you being the number 1 player in the Philippines is much like getting a domestic or national scale credit rating. When you go out and compete internationally, and you are just ranked no. 10 or 20, that’s like getting a global scale credit rating.
The two ratings complement each other. Investors will look at the rating that will serve their purpose.