India’s fiscal weakness remains a vulnerable spot in its sovereign credit profile, ratings agency Standard & Poor’s said on Monday, warning that a financial or a commodity “shock” may unwind fiscal improvements.
S&P said the government’s efforts to rein-in spending indicated the high priority of fiscal prudence, but warned that spending on subsidies and heavy governmentdebt remained concerns.
“Structural fiscal weaknesses continue to be vulnerabilities of Indian sovereign creditworthiness,” S&P credit analyst Kim Eng Tan said, reaffirming India’s BBB- sovereign credit rating with a “stable” outlook.
“Although India’s budgetary performances have strengthened in recent years, its hard-won fiscal improvements could yet unwind because of a financial or commodity shock,” Tan added.
Last week, Moody’s raised India’s outlook to “positive”, which brought it a step closer to an upgrade of the credit rating.
As the Ukrainian government and bondholders square up over a restructuring of the former’s debt, the country’s credit rating has been cut further into junk.
Kiev’s rating was lowered to ‘CC’ from ‘CCC-,’ by Standard & Poor’s on Friday, as the agency concluded that “a default on foreign currency central government debt is a virtual certainty.”
The government has said it plans to find about $15bn of debt relief, warning bondholders that this could include reductions in principals as well as lower interest payments and extended repayment schedules.
Britain’s general election is shaping up to be the closest since the 1970s, but that’s not worrying rating agency Moody’s.
The prospect of a period of uncertainty if neither the Conservatives or Labour capture a parliamentary majority at the May 7 poll won’t put any pressure on the country’s credit rating.
In a note on the election, Moody’s played down the significance of the differences in fiscal policies between the two main parties.
All major parties are committed to further fiscal consolidation, even if the approach and pace differ to some extent. Moody’s also points to the UK’s strong and stable institutions, which should ensure a smooth running of government during any interim period.
Instead, it’s the potential for more uncertainty over Britain’s membership of the European Union that could prove more damaging to the credit rating. It says:
An increased likelihood of the UK leaving the EU could result in negative rating pressures over the medium-term.
In a bid to prevent losing voters to the anti-EU party Ukip, prime minister David Cameron in early 2013 promised to hold an in-out EU referendum if he is returned to Downing Street.
China’s rating agency Dagong is currently holding talks with economic experts in Russia regarding the creation of a new independent agency, the Russian official said.
After sanctions had been imposed on Moscow by the West over Russia’s alleged role in the internal conflict in Ukraine, the Big Three credit rating agencies — Fitch, Moody’s and Standard & Poor’s – downgraded their rating regarding Russia’s creditworthiness.
“After the recent cases with Big Three rating agencies issuing politicized and biased assessments of the state and development prospects of Russian economy, this issue is of particular relevance,” sous-sherpa Vadim Lukov told journalists, adding that Russia is not the first country to suffer from “rating aggression and rating dumping.”
The Big Three have also published negative outlooks for Mercosur countries for 2015. Mercosur is a sub-regional economic bloc comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela alongside associate countries Bolivia, Chile, Colombia, Ecuador and Peru.
These steps and other questionable actions have prompted criticism from numerous experts and lawmakers worldwide, who believe that the proprietary ratings by the three primary western credit rating agencies are largely based on their interpretation of geopolitics and do not reflect reality.
The lowering of Russia’s credit ratings by three western rating agencies is a politically-motivated move and cannot be taken seriously, Guan Jianzhong, the president of Chinese rating agency Dagong, told Xinhua in an exclusive interview.
US rating agencies Moody’s, Standard & Poor’s (S&P) and Fitch use American political and ideological thinking to assess Russia’s risk of sovereign debt. As a result, Russia’s credit ratings were dropped to the level of BB– which is a totally unreasonable move, Jianzhong said.
When assessing a country’s credit standing, the aforementioned US credit agencies mainly emphasize the following factors: political system, GDP per capita, independence of a country’s central bank, economic system and the level of market privatization, as well as the right to issue international currency reserves.
“They are all ideological criteria and have nothing to do with a central government’s ability to generate revenues and its ability to repay debts. If one uses these standards to assess credit risks of the United States, one may come to the conclusion that the US economy would never default, because they can repay their debts by printing more money. It is obvious that these criteria are unfair.” – said the president of Dagong. >> Read More
Moody’s Investors Service has downgraded Central Bank of India (CBI) and Indian Overseas Bank’s (IOB) local and foreign currency deposit ratings to Ba1 from Baa3. At the same time, IOB’s senior unsecured debt, issued from its Hong Kong branch was also downgraded to Ba1 from Baa3.
The rating action reflects Moody’s assumption of a lower level of support from the Government of India (Baa3, Stable) following the government’s recent announcements that indicate that it wishes to differentiate between state-owned banks (SOE banks) when distributing capital.
Moody’s continues to assume a very high probability that the government would support these two SOE banks. However, the change of government policy means that the standalone credit quality of public sector banks has become a more important consideration for the senior unsecured and deposit ratings of the banks compared to previously when Moody’s rated all SOE banks at the same level as the Government of India.
At the same time, Moody’s has maintained its negative outlook on CBI’s local and foreign currency deposit ratings.
Moody’s has also maintained its stable outlook for IOB’s senior unsecured debt and local and foreign currency deposit ratings. >> Read More
07 February 2015 - 9:10 am
A testing week for Greece and its newly elected government has ended on a sour note.
The indebted country has had its credit rating cut to B- from B by rating agency Standard & Poor’s, while the outlook on the rating remains on negative.
S&P’s move comes at a particularly fraught time for Greece’s new government as it seeks to renegotiate the terms of a 2010 bailout the country took from fellow eurozone countries and the International Monetary Fund.
S&P said it had taken a notch off Greece’s rating because: >> Read More
05 February 2015 - 6:06 am
Standard & Poor’s ratings agency said Wednesday it had taken various rating actions on major Russian corporations following the recent downgrade of Russia’s sovereign rating from BBB- to BB+ or ‘junk’ status.
“We have reviewed our ratings on Russian corporations in the commodity exports, telecommunications, and infrastructure and utility sectors. We are consequently lowering our ratings on 14 companies and subsidiaries, affirming the ratings on 10 companies and subsidiaries, and revising several outlooks to negative” S&P said in a statement.
In particular, the agency downgraded the foreign currency ratings of Russia’s energy giant Gazprom, telecom operator MegaFon, railroads utility Russian Railways from BBB- to BB+.
Other corporations affected by various downgrades include Rosneft, Gazprom Neft, Transneft, Novatek and MTS. >> Read More
02 February 2015 - 19:24 pm
According to a company statement, the solid credit of Russian companies, in spite of falling oil prices, is largely due to relatively low income volatility compared to foreign competitors.
Russian companies’ endurance of the crisis could be explained by a retained progressive tax regime in prospecting and extracting oil and gas, the relative flexibility of the ruble exchange rate and the regulation of gas prices inside the country, Fitch said.
Fitch argued that the tightening of US and EU economic sanctions, imposed over Moscow’s alleged role in the Ukrainian crisis, is a much more important factor for influencing Russian company ratings. The sanctions have made it illegal for US and EU firms to provide key Russian oil companies with technology for deepwater, Arctic and shale oil drilling, and also complicated access to Western financial support. >> Read More
02 February 2015 - 12:08 pm
The Chinese Dagong Global credit rating agency has decided to maintain the A/A local and foreign currency sovereign credit ratings of the Russian Federation with a stable outlook.
“Although the Russian economy has been mired in deteriorating external circumstances, a certain scale of fiscal and foreign exchange reserves provides necessary buffers, keeping the deviation degree between available debt repayment sources and the wealth creation capability of the Russian government relatively small, and subsequently securing a basically stable debt repayment capability,” Dagong said in a press release Monday.
Meanwhile the world’s three largest rating agencies, Standard & Poor’s (S&P), Fitch, and Moody’s, have recently downgraded Russia’s credit ratings.
S&P downgraded Russia’s sovereign rating from BBB- to a “junk” BB+, a status indicating a probable default, on January 26.
On January 9, Fitch downgraded Russia’s sovereign debt rating to a BBB- amid falling oil prices and ruble depreciation, while Moody’s downgraded Russia’s credit rating back in October, 2014.
Kremlin spokesman Dmitry Peskov has said that the downgrades are politically motivated and do not reflect the real economic situation in Russia.