South Africa: Crucial rating review from S&P today - TDS

Analysts at TDS point out that a crucial rating review of South Africa from S&P will be announced today as after the Agency moved first on 3 April on downgrading South Africa in the wake of the March cabinet reshuffle, S&P now holds a split rating on the country’s local-currency and foreign-currency long term debt.

Key Quotes

“These are one notch above IG at BBB- and one notch below at BB+, respectively, while the outlook has been affirmed Negative after the downgrade. The downgrade of the former would put S. Africa’s sovereign into junk status from two of the three main rating agencies, potentially triggering large capital outflows. Therefore, the decision will be closely scrutinized by the market.”

“We think it’s a 50/50 chance that SA receives another downgrade from S&P at this stage; while we see the merits for a downgrade in case of prolonged political impasse and economic decline, we believe it may still be too early for such a decision only two months after S&P’s first move.”