South Africa: Moody’s rating review in focus today - TDS

Analysts at TD Securities point out that the Moody's is expected to release its review of South Africa's sovereign credit ratings (Baa3, stable outlook) likely after market closes in North America today and will be a key event.

Key Quotes

“Moody's will decide to change the outlook to negative to signal readiness to downgrade S. Africa if fiscal slippage, macroeconomic underperformance, or a substantial impact from SOEs on the state budget materialize.”

“We assign to a change in outlook a 55% chance and would expect, as a consequence, the rand to weaken by about 3.5% vs USD. We think there's a 30% chance that ratings are affirmed (in which case we see ZAR getting 2% stronger).”

“Finally, there's a 15% chance of an immediate downgrade to junk that would weaken the rand by 8% or more.”