Moody’s issued a media statement very late on Friday evening, saying its credit ratings for South Africa (SA), the Czech Republic and Saudi Arabia would not be updated as scheduled. They did not announce a new date, but there is speculation that it will take place after the mid-term budget (MTBPS) which will be delivered by new Finance Minister Tito Mboweni on the 24th of October.
In March this year, Moody’s maintained SA’s credit rating as investment grade and revised the credit outlook upwards, from negative to stable. It is therefore highly unlikely that they will now downgrade SA to junk status, especially before downgrading the outlook first.
Moody’s has however noted that SA has entered into a technical recession and subsequently cut SA’s growth forecast from 1.5% to 0.7-1% at the beginning of September. The weaker rand and accelerated inflation is putting severe pressure on SA’s growth prospects.
Moody’s was the only one of the three major ratings agencies not to downgrade SA’s debt to junk status in 2017, and remains the only one. The biggest risk a downgrade by them poses is that SA will then automatically be removed from the Citi World Government Bond Index, as all the major ratings agencies will rate our credit as sub-investment grade. Asset managers will be forced to sell billions of rand’s worth of SA’s bonds, and the effect on our economy will be immense.
Below is a summary of SA’s current credit ratings:
Stephan is a portfolio manager and full-time trader. He developed his passion for the markets while working in the Stockbroking division of Standard Bank and is especially passionate about CFD trading. Stephan studied at the University of Stellenbosch and completed a BComm Honours (Business Management) with a focus in Portfolio Management and Bonds. He has also passed the JSE Equity Trader’s Exam, RE5 (Representative) and RE1 (Key individual) Exams as well as the Registered Persons Exams (RPEs) in order to give advice on equities.