Budget will not offset South Africa junk rating risk

2016 ◽  
Keyword(s):  
South Africa ◽  
Industrial Development ◽  
Credit Rating ◽  
Content Type ◽  
Rating Agencies ◽  
Finance Minister ◽  
Downward Pressure ◽  
Containment Measures ◽  
Capital Outflows ◽  
Investment Grade

Subject Fiscal outlook for South Africa. Significance The IMF today welcomed Finance Minister Pravin Gordhan's budget -- which was the most critical in the post-apartheid period, given the threat by rating agencies that South Africa could lose its investment grade credit rating unless it stabilises its finances. The spending plan features moderate tax increases and several cost containment measures, but these could prove insufficient. Impacts The Industrial Development Corporation's initiative to boost employment-intensive sectors will probably fail due to strict labour laws. The Land Bank's special new loan facility will help farmers hurt by the regional drought, enabling them to resume production. A 'junk' sovereign credit rating would drive significant capital outflows, placing downward pressure on the rand.

Weak growth to weigh on South Africa's credit rating

2016 ◽  
Keyword(s):  
South African ◽  
Credit Rating ◽  
Good Governance ◽  
Content Type ◽  
Rating Agencies ◽  
Presidential Succession ◽  
Capital Outflows ◽  
Weak Growth ◽  
Investment Grade ◽  
Levels Of Support

Subject Outlook for South Africa's sovereign rating. Significance Recent decisions by the three main credit rating agencies to retain South Africa's investment-grade status following their respective mid-year reviews was met with relief within business and government circles. A downgrade to junk status risked a sharp depreciation in the rand, rising debt burdens, significant capital outflows and almost certain recession. The agencies will conduct their next reviews in December. Impacts Intra-ANC factionalism linked to the presidential succession will intensify after the municipal elections in August. If the ANC loses significant levels of support in major cities, its members may blame Zuma, possibly hastening his departure. Increased censorship by the state-owned South African Broadcasting Corporation will undermine good governance. High unemployment will persist, which, together with interest rate hikes, will dampen prospects for a recovery in consumption growth.

Inflation 'solution' should help avoid Brazil default

2016 ◽  
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Case Scenario ◽  
Current Crisis ◽  
Content Type ◽  
Rating Agencies ◽  
Primary Deficit ◽  
Political Conditions ◽  
The Government ◽  
Investment Grade

Significance Days before this announcement, the government asked Congress to approve a primary deficit of up to 96.65 billion reais (some 1.5% of GDP) for this year. The sharp deterioration in fiscal performance in recent years led the three main credit rating agencies to strip Brazil of its investment grade status between September 2015 and February 2016. A profound and prolonged recession and dysfunctional politics that make it difficult to address Brazil's fiscal shortcomings have also increased concerns over the sustainability of the country's sovereign debt. Impacts The depth of the current crisis could lead to political conditions for bolder economic reforms. However, that best-case scenario is out of reach for the current government. Even fortunate future governments would only enjoy a narrow window of opportunity to seek ambitious reforms.

Russian economic gloom belied by benign debt outlook

2016 ◽  
Keyword(s):  
Credit Rating ◽  
External Shocks ◽  
Public And Private ◽  
Monetary Policies ◽  
Content Type ◽  
Domestic Debt ◽  
Capital Outflows ◽  
Fiscal Austerity ◽  
Investment Grade ◽  
Sovereign Credit Rating

Subject Russia's foreign and domestic debt position. Significance Standard & Poor's (S&P) raised its outlook for Russia's sovereign credit rating from 'negative' to 'stable' on September 16. At BB+, the agency's rating for Russia remains a notch below investment grade, as does Moody's, but S&P notes that the economy has demonstrated resilience in its response to external shocks and that plans for fiscal austerity are encouraging. The scale of Russian external debt, both public and private, is modest thanks to years of eschewing borrowing. Impacts Providing fiscal and monetary policies remain prudent, net private capital outflows are likely to be limited. Corporate ruble bonds, already enjoying some popularity among foreign investors, are likely to remain attractive. When financial sanctions are eventually lifted, some Russian companies able to repay debt will pull in foreign direct investment.

Vietnam anti-corruption drive may have limited success

2018 ◽  
Keyword(s):  
Credit Rating ◽  
Content Type ◽  
Rating Agencies ◽  
High Profile ◽  
Limited Success ◽  
Orderly Transition ◽  
Investment Grade ◽  
General Secretary ◽  
Standing Problem ◽  
Party Congress

Subject Vietnam's corruption crackdown. Significance Vietnam’s latest anti-corruption drive is set to target more high-profile figures. The country has a long-standing problem with institutional corruption, but critics of the ruling Communist Party of Vietnam (CPV) see its crackdowns as politically motivated. Impacts Improvements in corruption indices may convince credit rating agencies to edge Vietnam closer to investment-grade status. Greater CPV discipline may help General Secretary Nguyen Phu Trong engineer an orderly transition of leadership at the 2021 party congress. Vietnam is likely to face greater international criticism over human rights violations.

The impact of market sectors and rating agencies on credit ratings: global evidence

2019 ◽  
Vol 20 (5) ◽  
pp. 389-410
Author(s):  
Kerstin Lopatta ◽  
Magdalena Tchikov ◽  
Finn Marten Körner
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Content Type ◽  
Rating Agencies ◽  
Credit Rating Agency ◽  
Rating Agency ◽  
Investment Grade ◽  
The Impact ◽  
Rating Downgrades

Purpose A credit rating, as a single indicator on one consistent scale, is designed as an objective and comparable measure within a credit rating agency (CRA). While research focuses mainly on the comparability of ratings between agencies, this paper additionally questions empirically how CRAs meet their promise of providing a consistent assessment of credit risk for issuers within and between market segments of the same agency. Design/methodology/approach Exhaustive and robust regression analyses are run to assess the impact of market sectors and rating agencies on credit ratings. The examinations consider the rating level, as well as rating downgrades as a further measure of empirical credit risk. Data stems from a large global sample of Bloomberg ratings from 11 market sectors for the period 2010-2018. Findings The analyses show differing effects of sectors and agencies on issuer ratings and downgrade probabilities. Empirical results on credit ratings and rating downgrades can then be attributed to investment grade and non-investment grade ratings. Originality/value The paper contributes to current finance research and practice by examining the credit rating differences between sectors and agencies and providing assistance to investors and other stakeholders, as well as researchers, how issuers’ sector and rating agency affiliations act as relative metrics.

Zuma's hold on South Africa's ANC will weaken

2016 ◽  
Keyword(s):  
Institutional Investors ◽  
Credit Rating ◽  
Crowding Out ◽  
Content Type ◽  
Rating Agencies ◽  
State Capture ◽  
Investment Grade ◽  
A Share

Significance Yet Zuma's speech failed to restore his credibility, which has suffered several blows in recent weeks. Nor did it reassure investors and rating agencies, despite a threatened credit rating downgrade to 'junk' status. Impacts A credit downgrade would significantly raise the share of debt servicing as a share of overall spending, crowding out other priorities. It would also drive significant portfolio outflows -- since many institutional investors are barred from sub-investment grade sovereigns. Increasingly, anti-Zuma ANC factions will use opposition argot warning of "state capture" by corrupt elites to discredit him.

India will struggle to revive growth quickly

2020 ◽  
Keyword(s):  
Credit Rating ◽  
Prime Minister ◽  
Fiscal Year ◽  
Gdp Growth ◽  
Credit Rating Agencies ◽  
Fiscal Deficit ◽  
Content Type ◽  
Rating Agencies ◽  
Goods And Services ◽  
Finance Minister

Subject Outlook for India's economy following the 2020/21 budget. Significance Prime Minister Narendra Modi’s government estimates that GDP growth for fiscal year 2019/20 (April-March) will be 5.0%, the lowest full-year rate in eleven years. Finance Minister Nirmala Sitharaman earlier this month presented a budget for 2020/21 and said growth would pick up to 6.0-6.5% in that year. Impacts Further widening of the fiscal deficit could prompt credit rating agencies to downgrade India’s outlook. Some states may try to reclaim powers of taxation that they surrendered when the Modi government introduced the Goods and Services Tax. Modi will double down on efforts to promote the ‘Make in India’ initiative, which is designed to increase domestic manufacturing.

The impact of risk rating agencies decisions on investment and economic growth in South Africa

2020 ◽  
Vol 11 (1) ◽  
pp. 109-109
Author(s):  
Daniel Meyer ◽  
Lerato Mothibi
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Credit Ratings ◽  
Primary Objective ◽  
Rating Agencies ◽  
Sovereign Credit ◽  
Investment Grade ◽  
The Impact

Over the last decade, the South African economy has endured prevailing economic challenges including weak economic growth, unreliable electricity supply, rising fiscal deficits, sub-duded investment inflows and the inexorable rise in government debt alongside the expected impact of the corona virus pandemic. Credit ratings have greatly evolved making them key elements in the modern financial markets because of their opinions of credit worthiness, as many investors across the globe relay heavily on their opinions. South Africa unlike many of its developing counterparts, has since struggled to maintain its sovereign ratings above non-investment grade since the 2007/2008 global financial crisis. Despite the economic constraints faced by the country, the sovereign credit downgrade path has landed the country's financial stance back prior to democracy, following the loss of investment grade rating from the big three credit rating agencies. The significance of credit ratings on investments and growth has therefore come to the fore, as having an understanding of how credit ratings affect investments and economic growth in South Africa is crucial for the formulation of key strategies that should be developed to stimulate and attract investments, as well as encourage and promote long term growth and development. The primary objective of this study is therefore to analyse the impact of sovereign credit rating on investments and economic growth in South Africa.

Hungary's return to investment grade is likely in 2016

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Euro Area ◽  
Credit Rating ◽  
Investor Sentiment ◽  
Content Type ◽  
East European ◽  
Rating Agencies ◽  
The Core ◽  
Investment Grade

Significance Moody's, another agency which also rates Hungary one notch below investment grade, has just raised its outlook on Hungary's rating to 'positive' from 'stable'. Hungary's financial markets are closely correlated with those of the core of the euro-area and are benefiting from heightened expectations that the ECB will provide a further burst of monetary stimulus at its next policy meeting on December 3. Impacts Financial markets have already 'priced in' the credit-rating agencies' assessments so other factors will drive investor sentiment changes. Forex-denominated mortgages are considered to be one of the main sources of financial vulnerability in Emerging Europe. Hungary is the only Central-East European (CEE) country to have resolved this vexed issue. CEE is the EM region likely to benefit the most from aggressive ECB monetary stimulus offsetting the fallout from higher US interest rates.

Assessing sovereign risk: the case of rich countries

2014 ◽  
Vol 6 (3) ◽  
pp. 212-225 ◽  
Author(s):  
Norbert Gaillard
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Bond Yields ◽  
Content Type ◽  
The Great Recession ◽  
Market Participants ◽  
Investment Grade ◽  
Rich Countries

Purpose – This paper aims to shed new light on the inability of credit rating agencies (CRAs) to forecast the recent defaults and so-called quasi-defaults of rich countries. It also describes how Moody’s sovereign rating methodology has been modified – and could be further improved – to solve this problem. Design/methodology/approach – After converting bond yields into yield-implied ratings, accuracy ratios are computed to compare the respective performances of CRAs and market participants. Then Iceland’s and Greece’s ratings at the beginning of the Great Recession are estimated while accounting for the parameters included in the new methodology implemented by Moody’s in 2013. Findings – Market participants outperformed Moody’s and Standard & Poor’s in terms of anticipating the sovereign debt crisis that hit several European countries starting in 2008. However, the new methodology implemented by Moody’s should lead to more conservative and accurate sovereign ratings. Originality/value – The chronic inability of CRAs to anticipate public debt crises in rich countries is dangerous because the countries affected – which are generally rated in the investment-grade category – are substantially downgraded, amplifying the sovereign debt crisis. This study is the first to demonstrate that Moody’s has learned from its recent failures. In addition, it recommends ways to detect serious threats to the creditworthiness of high-income countries.

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