Posts Tagged: credit rating

 

India’s credit rating is likely to withstand a surge in the sales of shares and bonds by overseas investors triggered by a growing tax row, rating agencies Moody’s and Fitch told Reuters on Thursday.

“India’s external balances are strong relative to peers on some accounts, and can withstand the current outflows, for instance due to the high level of foreign-exchange reserves,” said Thomas Rookmaaker, director at Fitch’s Asia-Pacific Sovereign Group, wrote in an email to Reuters.

Fitch affirmed its “BBB-minus” and “stable” outlook on India last month.

Overseas funds chalked up their biggest single-day sales of Indian shares and bonds in a year and a half on Wednesday, fueling concern Asia’s third-largest economy will drive off foreign investors with its minimum alternate tax (MAT). >> Read More

 

The Conservatives’ surprise UK election victory will have no direct impact on the country’s sovereign credit rating. The party is committed to further fiscal consolidation, Moody’s Investors Service said in a report on Friday. However, the credit impact on specific sectors will be more pronounced.

 The report “Winners and losers from the Conservative election victory”, is now available on www.moodys.com. Moody’s subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

 “The election result has no impact on the UK’s sovereign impact. The Conservatives have committed to pursuing further fiscal consolidation to stabilise and eventually reverse the rising public debt,” says Kathrin Muehlbronner, a Moody’s Senior Credit Officer and a co-author of the report. “However, the issue of Britain’s continued membership of the European Union could have broader consequences.”

 If the Conservative Party’s plan to hold a referendum on European Union membership resulted in the UK’s exit, this could have further consequences for the whole economy. There could be potential repercussions for the sovereign rating if the UK is unable to broadly replicate the benefits of EU membership. The outcome of a referendum remains highly uncertain.

 The election result’s impact on specific sectors will be more marked. >> Read More

 

The final results of the UK general election are still dripping in but already minds are turning to how the potential policies of a new Conservative government could affect the economy.

Rating agency Moody’s has reassured that the election will have no impact on the UK’s credit rating but it has warned that if the Conservative Party presses ahead with a promised referendum on Britain’s membership of the European Union — there would potentially be ramifications.

In a note reacting to the election result, which produced a surprisingly convincing victory for the Conservatives, Kathrin Muehlbronner, vice president-senior credit officer at Moody’s said:

if the Conservative Party’s plan to hold a referendum on European Union membership results in the UK’s exit this could have consequences for the whole economy, including potentially for the sovereign rating, if the UK was unable to broadly replicate the benefits of membership.

UK equities have enjoyed a relief rally on Friday, with the FTSE 100 trading up 1.97 per cent at 7,022.76 at publication time while the more domestic-focused FTSE 250 has gained 3 per cent to 17,949.07.

>> Read More

 

The ultra-low yields gripping global capital markets made their mark on an ancient seat of learning this week, as an Oxford college became the first UK university institution to issue a bond in 2015.

The £40m bond, which was launched this week by University College, Oxford and matures in 50 years, carries a coupon of 3.1 per cent.

The debt, which was pre-placed on the London Stock Exchange, is lower yielding than any bond issued by a UK university on record, according to Dealogic.

University College’s bond is a sign that a wider range of issuers — from the boardrooms of multinational corporations to the spires of august educational institutes — are aware of the opportunity to lock in long-term credit at historically low rates.

“We were struck by the level of interest rates and it seemed to be an opportunity to bring in external capital for the long-term on good terms,” said Frank Marshall, estates bursar at the Oxford college. >> Read More

 

Moody’s Investors Service says that how recently elected leaders in India and Indonesia implement their pledges to improve infrastructure and governance will determine the respective credit trajectory of each sovereign, both rated Baa3. 

According to Moody’s, India and Indonesia’s growth will continue to outperform similarly rated peers, and macroeconomic policy vigilance is likely to contain inflation and balance of payments pressures in the near term. If policies also address Indonesia’s exposure to external volatility and India’s weak fiscal and banking metrics, their respective credit profiles would improve. 

These conclusions are contained in the rating agency’s report titled India and Indonesia – Peer Comparison: Reform Implementation to Determine Credit Trajectories. The report is an update to the market, and does not constitute a rating action. 

The report notes that India and Indonesia’s Baa3 sovereign ratings reflect shared credit strengths of robust economic size and growth, and similar credit challenges of weak governance and infrastructure. But the two sovereign’s credit profiles also have important differences. India’s fiscal metrics are weaker than Indonesia’s, and contribute to inflation and high domestic capital costs. Indonesia is more vulnerable to global trends. The Southeast Asian nation’s vulnerability stems from the larger proportion of commodities in its exports, its higher share of non-resident financing of government debt, and its shallower domestic capital market. 

>> Read More

 

Moody’s Investors Service has today downgraded Greece’s government bond rating to Caa2 from Caa1. The short-term rating is unaffected by this rating action and remains at Not Prime(NP).The outlook on the rating is negative. Moody’s government bond rating applies to debt issued on private sector terms only.

 This rating action concludes the review for downgrade that commenced on 6 February 2015.

 The key drivers behind the downgrade are :

 1) The high uncertainty over whether Greece’s government will reach an agreement with official creditors in time to meet upcoming repayments on marketable debt.

 2) The significant implementation risks of a follow-up, medium-term financing programme even if an agreement is reached, given the weakened economy and a fragile domestic political environment.

 The negative rating outlook reflects Moody’s view that the balance of economic, financial and political risks in Greece is slanted to the downside.

 Concurrently, Moody’s has lowered the country’s local- and foreign-currency bond ceilings to B3 from Ba3, which reflects the increased probability that Greece may exit the euro area in the event of a sovereign default.

 In addition, Moody’s has also lowered the local- and foreign-currency bank deposit ceilings to Caa3 from Caa1 to capture the heightened risk of a deposit freeze, if depositor confidence weakens further. The short-term local- and foreign-currency bond and deposit ceilings remain Not Prime (NP).

>> Read More

 

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.

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