S&P changes South Africa’s outlook to negative – TDS

By FXStreet FXStreet (Guatemala) – Analysts at TD Securities noted that the first of the two rating reviews of South Africa scheduled for today was resolved with a change of outlook to negative from stable by S&P, and the affirmation of the BBB.

Key Quotes:

“The decision was not too surprising given the recent set of disappointing data and the ever slowing economy that expanded only by 1.0% Y/Y in Q3 2015.

As a consequence, the market has been pricing in downgrades for a while. Relative to its split BBB-/BBB ratings, we estimate that the implied average ratings from the three main agencies (S&P, Moody’s and Fitch) is approximately 1.5 notches lower, which suggest sub investment grade levels.

USDZAR reacted with a knee-jerk bounce to 14.40 from around 14.29, before the rand pared back half of these losses and currently trades around 14.37. This is still 0.2% stronger vs USD on the day, which signals the good ZAR performance in spite of the negative announcement.

In their statement, S&P mentioned that slow growth, weak external demand, low commodity prices, electricity constraints, and weak business confidence that inhibit substantial private investment are the main reason for the outlook change. Yet, the Agency noted that the National treasury maintains …read more

Source:: FX Street