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Moody’s unscheduled visit to SA raises concerns over possible credit downgrading

───   OLEBOGENG MOTSE 14:42 Fri, 10 Nov 2017

Moody’s unscheduled visit to SA raises concerns over possible credit downgrading  | News Article

Expectations are such that South Africa might be downgraded to “official” junk status by rating agencies, Moody’s, as well as S&P later this month.


This is according to Portfolio Manager at PSG, Amelia Morgenrood, who was commenting on Moody’s rumoured unscheduled visit to South Africa this week.

Morgenrood says Malusi Gigaba’s Medium Term budget painted a bleak picture of the country’s economy after announcing that the country would be borrowing money to help fund the wider budget deficit. Gigaba also indicated that Treasury had revised economic growth from 1,3% to 0,7% for 2017.

“We expect that the fiscal deficit over time will become wider and the rating agencies are aware of these facts,“ says Morgenrood. At present, only Fitch has the country’s international debt at junk status, while F&P and Moody’s are expected to review the country’s credit ratings later this month. Economists are in agreement that a downgrade is inevitable, warns Morgenrood.

She says the moment the two credit rating agencies downgrades to junk then it will become official. The problem is South Africa will be kicked out of the JP Morgan Bond Index. Numerous exchange-traded funds and investors all over the world will thereafter be forced to sell the country’s government debt, that is in our bond market. “Since about 40% of our debt is held by foreigners, no one is sure how much exactly will flow out of the market but the expectation is that in the region of R100 billion will flow out of the country,” says Morgenrood.


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