Relief over rate freeze
Moody’s signals a no-change position
LOCAL markets can breathe a bit more easily after Moody’s Investors Service failed to release its rating statement on Friday, meaning South Africa’s sovereign rating remained unchanged at Baa3 stable in a week that saw local stocks tumbling, in line with those globally, and rand volatility on the change of guard at the helm of the finance ministry.
Mamello Matikinca, FNB’S chief economist, said on Friday that the credit rating agency had essentially communicated a no-change stance until at least after the national elections next year. “While they are, like everyone else, expecting a deterioration in the fiscal metrics at the medium-term budget policy statement (MTBPS), they acknowledge that the low foreign currency exposure and maturity profile of South Africa’s debt should provide a platform for recovery,” Matikinca said.
Peter Attard Montalto, the head of capital markets research at Intellidex, said Intellidex expected Moody’s to keep ratings unchanged this year and only downgrade the outlook after next year’s Budget as further budget and downward-growth surprises came to a head with limited signals of further reforms.
“Downgrading the rating level before the elections, however, is hard, given we expect Moody’s to still continue its form of liberally applying too much benefit of the doubt around growth-positive reforms to come.
“Yet Moody’s is on track, in the long run, to cut into junk in our view as it is slowly abandoning the long-run view that debt to GDP will fall with growth-boosting reforms. Pencilling in such a date remains hard and looks most likely after the 2019 MTBPS when a mixture of political infighting, lack of reform and further budget slippage all come to a head.”
The rand gained at the end of last week on the resignation of Nhlanhla Nene as finance minister and the swearing in of Tito Mboweni as his replacement and ahead of the expected Moody’s release.
At 3.30pm on Friday, the domestic currency was trading at R14.45 to the dollar, staying within a range of R14.42 to R14.65 as expected by analysts.
Chris Harmse, the chief economist of Rebalance Fund Managers, said the news of Mboweni’s appointment as the new minister of finance brought calmness and optimism among foreign investors. In reaction, the rand exchange rate improved strongly during last week, gaining US60C from levels of around R15.05 to the dollar on the Friday before last to R14.45 on Friday evening.
THE much-anticipated Natal Orchid Society bi-annual Orchid Show took place yesterday at the Parkhill Bowling Club in Durban North. The show appealed to everyone from avid orchid fans to those who just enjoy exquisite floral beauty. On display for judging were a fabulous variety of hybrids and species. Attending the event was Aneesa Bux from Blythedale. |