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Sarb says Moody’s cut could risk $8bn selloff

The impact would still, however, depend on the global attitude towards emerging markets, deputy governor says.
Sarb concerned about the impact of Moody's credit rating decision on SA's jittery economy. Image: Moneyweb

South African Reserve Bank Deputy Governor Kuben Naidoo said if Moody’s Investors Service cuts the country’s credit rating to junk there could be a selloff of between $5 and $8 billion of its bonds.

Moody’s last month cut its outlook on South Africa’s rating to negative, meaning the next move could be a reduction to junk because its current assessment is the lowest investment grade. That would bring it into line with S&P Global Ratings and Fitch Ratings. Like the other two major ratings companies, it’s concerned with deteriorating government finances and the indebtedness of state-owned companies.

Read: SA outlook cut to negative by S&P amid fiscal woes

Still, the impact on wider markets and the currency would largely depend on the global attitude toward emerging markets at the time the decision is made, Naidoo told journalists in Johannesburg on Wednesday.

“It is very hard to model the impact,” he said.

© 2019 Bloomberg L.P.

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