Brighter outlook for SA reflects in bank index high
The index hits a 15-month high as fears of a December credit rating downgrade recede
The banks index reached a 15-month high on Tuesday as the investment community’s fears of a December credit rating downgrade receded, bolstered by news that SA’s spending on nuclear projects has been delayed until 2037. The index reached its highest level since the end of August 2015 on Tuesday afternoon. Ratings agencies have flagged nuclear as a concern, given SA’s strained fiscus and the possible negative effects on the debt-to-GDP ratio. "If market participants become less concerned about SA getting a downgrade next month, it usually results in the rand exchange rate trading a bit stronger and South African bond yields moving down, all else being equal," said Adrian Cloete, an analyst at PSG Wealth. As the South African 10-year bond yield "moves lower, some shorter-term market participants could start to use a lower-risk discount rate to value banking shares, which results in higher implied valuations. We have seen some of this already in the recent rally of South African bankin...
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