Jittery Friday likely as JSE awaits Moody’s verdict
The credit rating agency is expected to hold SA’s credit rating at one notch above junk and maintain its negative outlook
Credit ratings agency Moody’s is scheduled to issue a review of SA’s credit rating after US markets close on Friday, probably between 11pm and midnight local time.
Moody’s is the only one of the big three ratings agencies to still hold SA’s sovereign credit rating above junk, and will hopefully not cut the country’s rating without first giving its customary warning of placing the country on its negative watch list.
Before Moody’s downgraded SA’s sovereign credit rating to Baa3 on June 9, it signalled its intention on April 3 by adding the word "watch" to its negative outlook. It then changed its outlook back to negative (without appending the word watch) when it cut SA’s rating to one notch above junk.
Both S&P and Fitch cut SA to junk status of BB+ a few days after President Jacob Zuma’s Cabinet reshuffle on March 31 in which Malusi Gigaba replaced Pravin Gordhan as finance minister.
Moody’s rating of Baa3 equates to BBB- in S&P’s and Fitch’s nomenclature, which is one level above junk.
The ratings agency said in its June 9 statement that it could raise its outlook on SA from negative to stable if "the government were to deliver on commitments that indicated the continued independence and strong policy-making capabilities of SA’s policy institutions" and "a decline in the value of guarantees to state-owned enterprises would also be credit positive".
None of these have happened, so Moody’s outlook is bound to remain negative.
Wall Street fell sharply on Thursday, with the Nasdaq index closing more than 2% down and the S&P 500 and Down Jones Industrial indices both losing about 1% on fears of war between the US and North Korea.
London’s FTSE 100 index fell 1.4%, Frankfurt’s DAX 30 fell 1.2% and Paris’s CAC 40 fell .6%.
US President Donald Trump said on Thursday his earlier threat of "fire and fury" against North Korea "maybe wasn’t tough enough". He said North Korea "better get their act together" or face trouble "like few nations have ever been in trouble in this world".
Tokyo was closed for a public holiday on Friday while Sydney’s S&P/ASX 200 index was down 1.3% ahead of the JSE’s opening on Friday morning.
The JSE’s all share index shed 0.5% to close at 55,701 points on Thursday.
The rand was trading at R13.46/$, R15.85/€ and R17.49/£ at 6.55am on Friday morning.