Firms mixed reaction to Moody’s
Ratings downgrades trigger different share movements
JSE-LISTED companies, whose credit ratings were downgraded by Moody’s Investor Services on Monday, had a mixed showing on the bourse yesterday.
The rating action on Monday followed the weakening of the South African government’s credit profile, and Moody’s lowering of the South African sovereign rating to Baa3 from Baa2 last Friday.
The axe fell on MTN, Sasol, Bidvest, Growthpoint Group and also on state owned Transnet and Eskom, although it also affirmed the credit ratings of nine other JSE listed companies including AngloGold Ashanti, the only South African mining company on the global Top 40 Mining Index.
Africa’s largest telecoms firm by subscribers MTN saw its share price lose 2.6 percent yesterday to close at R111.40 a share, while petrochemicals giant Sasol lost 0.25 percent to close at R364.61 a share. Bidvest, the trading and distribution company, gained 0.42 percent to close at R161.15 a share.
Moody’s downgraded MTN to Ba1 from Baa3, and assigned a stable outlook to the company.
Moody’s said it had assigned the stable outlook to the company as it expected that MTN would preserve its current market positions and current operating margins and maintain a strong liquidity profile over the next 12 to 18 months.
It also said that the Ba1 rating position adequately captured the current challenges faced in its key markets South Africa and Nigeria and the repatriation constraints faced by MTN Nigeria, resulting in MTN being more reliant on cash flows outside its key markets. Moody’s affirmed multinational media group Naspers and Steinhoff ratings at Baa3 with a stable outlook. It also affirmed AngloGold Ashanti senior unsecured ratings.
“The affirmation of AngloGold Ashanti’s Baa3 rating is based upon the company’s diversification of gold production outside of South Africa, which only represents around 17 percent of group interest, taxes, depreciation and amortisation adjusted for an apportioned share of corporate costs”, said Douglas Rowlings, a Moody’s analyst.
It affirmed the credit ratings of Barloworld, the Fortress Income Fund, Hyprop Investments, Telkom, Imperial Group, and Redefine Properties at Baa3 with a negative outlook.
Investec Bank’s chief economist, Annabel Bishop, said that from an economic perspective, South Africa’s 2017 (April and June) credit rating downgrades were expected to negatively affect domestic confidence measures, with some large corporate fixed investment and consumer expenditure decisions likely being put on hold.
She also said concerns over political and economic policy uncertainty for the future was negatively impacting sentiment.