Why SA companies will ride out currency crisis better than their counterparts in Turkey
Deep and liquid local debt markets have reduced the need for South African companies to borrow abroad, making them less vulnerable to a financial crisis than peers in Turkey and other emerging markets, according to Moody’s Investors Service. Large external financing needs and a plunging currency are proving a toxic mix for Turkey’s corporate sector. But in South Africa, companies have enough access to local funding, and those that have turned to foreign debt used hedging strategies to cushion the effects of short-term currency fluctuations or buy time to adjust to long-term rand weakness, Moody’s said in a report dated September 12. In addition, most foreign borrowing by South African companies has been driven by offshore expansion and the debt is serviced with cash flows generated in the same currency, creating a natural hedge to currency weakness, the report said. "Currency volatility in emerging markets has been one of the key focus areas for investors this year, particularly in ...
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