Market relief after Moody's says it might grant a stay of execution
JOHANNESBURG - The market breathed a sigh of relief yesterday after Moody’s indicated that it may grant the country a stay of execution when it announces its expected ratings review in March.
Moody’s said that there was nothing to flag at the moment on South Africa's economic performance, thwarting fears that it may downgrade the country's sovereign debt to junk.
It said it would await Finance Minister Tito Mboweni’s Budget speech next month to see if there would be any reforms.
The downgrade threat had
BOEING, which remains mired in crisis following two fatal crashes of its top-selling 737 MAX, is set to report another ugly set of financial results on Wednesday.
The aerospace giant, led by newly-installed Chief Executive David Calhoun, is expected to announce billions of dollars in additional costs connected to the MAX grounding.
The plane has been out of rattled the markets since the ratings agency reviewed the country’s outlook from stable to negative last year.
The possible reprieve bolstered the markets slightly as the rand held steady at 0.14percent to R14.60 against the dollar by 5pm, following days of pressure amid emerging market volatility and global risk-off sentiment over deadly Chinese coronavirus.
China’s deadly coronavirus hit global stocks on Monday, with the FTSE/JSE All Share Index falling by 2.37percent to a six-weeks low as risk-averse investors fled to safer options such as bonds and gold.
But Lukman Otunuga, service since March after the second of two crashes that killed 346 people. Boeing suspended production on the plane earlier this month.
A hefty charge could push annual results into the red for the first time in more than two decades, capping a disastrous year in which Boeing already lost its crown as the world's biggest plane maker.
Still, much of the bad news already baked into the is a senior research analyst at FXTM, said the rand was likely to remain unfazed by Moody’s comments as concerns about the coronavirus fears and the impact it may have on global growth mounted.
“We expect the rand to become highly sensitive to external and domestic risk ahead of the 2020 Budget in February,” Otunuga said. “The local currency is shaky against the dollar and could slip back towards 14.70 in the near term if the rand continues to depreciate.”
South Africa’s economy is holding on to the last investment grading above
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Shares have fallen more than 20 percent over the last 10 and a half months as the grounding has dragged on, prompting downgrades from credit agencies S&P and Moody's.
With its stock so beaten down “there could at some point be a tactical trading opportunity” when the plane is cleared to fly again, Credit Suisse said in a note earlier this month.
Until then, “we see numerous risks that impact the long- term investment thesis and therefore our ability to become constructive,” Credit Suisse added.
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Both S&P Global and Fitch Ratings downgraded the country’s sovereign credit rating to junk in 2017.
In November, Moody’s reviewed South Africa’s outlook from stable to negative, mainly due to unsustainable government debt, but maintained the country’s credit rating status at investment grade. Nolan Wapenaar, head of fixed income at Anchor Capital said the downgrade was not a foregone conclusion. Wapenaar said the market worked on a 65percent to 70percent probability. status by
Administration (FAA) spokesman said Friday that the agency was “pleased” with Boeing’s progress in meeting MAX milestones, but the agency still has no timetable to return the jet to service.
Analysts will press Calhoun for updates on speculation that the FAA could clear the MAX to fly before the current mid- 2020 timeframe.
Calhoun is also likely to face questions on other commercial programmes, including whether Boeing will further trim production of the 787 Dreamliner due to lower Chinese demand, and the status of a long-discussed plane aimed at middle distances.