credit ratings

In another unhappy turn for Pakistan, China’s president Xi Jinping postponed a state visit to the country on Saturday after three weeks of anti-government protests. Moody’s, one of the three big international credit rating agencies, warned this was a credit negative for the country because it would delay “Chinese aid and a host of deals between the countries”.

Such deals with China, Pakistan’s largest trading partner, are reported to be worth $34bn

Standard & Poor’s, the international rating agency, cut Brazil to one notch above junk on Monday evening, adding to a chorus of complaints from many in the investment community, not to mention ordinary Brazilians, that the country’s once-promising growth story is currently shot to pieces.

No prizes for guessing how that went down in Brasília. As if to remove any doubt, the finance ministry put out a strongly-worded statement, rubbishing S&P’s decision point by point. But the ministry hasn’t done itself any favours. 

Six years of recession and government “inertia” are taking their toll on the EU’s newest member, according to Standard & Poor’s, which downgraded Croatia on Friday. The country’s long-term debt rating now stands at BB, lowering it further into non-investment grade. Hopes of an immediate departure from years of stalling on reform are dim – and it is scant reassurance that Croatia is not yet in fiscal crisis. 

Recovering growth, a new settlement on Kosovo, real progress with the European Union, generous funding packages from the UAE and Russia and new trade and investment ties – last year was a pretty good one for Serbia. The government is already looking to cash in on the success with a snap election in the spring.

But has the positive news papered over real cracks in the economy? That is the view of Fitch, the ratings agency, which on Friday downgraded Serbia to B+, or “highly speculative junk” status. 

Socially-conservative Sharjah, the third largest economy in the United Arab Emirates, is showing a bit of leg – financially speaking.

The emirate bans alcohol and enforces a modest dress code, marking Sharjah out from its flashier neighbour, bling-tastic tourist magnet Dubai. But the education- and culture-focused emirate has stepped out, opening its books to credit agencies. Paving the way for a potential sovereign bond, Standard & Poor’s and Moody’s on Wednesday issued it long-term sovereign credit ratings of A and A3, respectively. 

What’s in store for South Africa in 2014? As far as economists and rating agencies are concerned, it’s a mixture of pressure on the current account deficit, sluggish growth and a constrained business environment.

There’s also the no-small matter of the upcoming national election which will have a big effect on labour relations that have so often blighted the economy and politics. Can a few domestic policy adjustments make the difference? 

Bulgaria’s government has been besieged by protesters for six months, and oversees an economy that has averaged growth of just 1 per cent since 2010. Those were the main factors behind Standard & Poor’s recent decision to revise its outlook for the country to “negative” from “stable”.

The change may be unwelcome, but merely reflects the difficult economic and political situation. Will it affect Bulgaria’s fledgling recovery? 

Amid rampant inflation, widespread shortages, a yawning fiscal deficit, a tightening grip on the private sector and dwindling foreign cash reserves, many are worried about Venezuela’s economy.

That includes Standard & Poor’s, which on Friday cut the rating of the oil-rich country one notch, to B- from B, with a negative outlook. 

A bit of good news for Egypt: rating agency Standard and Poor’s upgraded the country’s credit rating on Friday on foreign long-term borrowings to ‘B-’ from ‘CCC+’.

In other words, Egypt is considered as now having the capacity to meet its financial oblogations, as opposed to being “vulnerable”. Up is the way to go. 

African growth is soaring away, as anyone who has looked at the IMF figures can tell you. Meanwhile, governments are able to tap the international debt markets, as investors are still willing to snap up bonds from established and first-time issuers.

So credit ratings should be on the up too, shouldn’t they? If debt is backed by growth, doesn’t credit risk decrease? Not so fast, says Standard and Poor’s. 

Mirror, mirror on the wall, which of the big four emerging markets would be the first to lose its investment grade status?

Quite possibly Brazil, according to Bruno Rovai and Marcelo Salomon over at Barclays. 

Credit rating agency Standard & Poor’s downgraded Ukraine’s long term foreign debt to ‘B-’ from ‘B’ on Friday, citing the government’s “lack of strategy” to secure foreign currency funding.

S&P’s outlook on the country remains negative, meaning that Ukraine could slip into the ‘C’ range. 

Tunisia became the third African sovereign to be downgraded by rating agency Fitch in October on Wednesday, alongside Zambia and Ghana.

The agency reduced the long term foreign currency rating on the north African state by two notches, from ‘BB+’ to ‘BB-’. Having been just one level below investment grade, Tunisia now finds itself three places below. Fitch cited the political crisis as the major factor. 

What do you do when you get downgraded by a major credit rating agency, citing deteriorating government finances and macroeconomic policies that “could deter investment”?

Issue more debt! Or at least that’s the possible plan from Zambia, once a credit darling issuing a eurobond at 5.75 per cent (cheaper than Spain, as everyone noted at the time), but now rated just ‘B’ by Fitch after a downgrade on Monday. That’s the same level as on-the-brink Ukraine, and just one notch above Greece, Egypt and Argentina. 

A vote of confidence for Peru: Fitch Ratings, the credit rating agency, has upped its foreign debt rating to ‘BBB+’, two notches above the lowest investment grade. This puts Fitch’s rating in line with that of Standard and Poor’s which upgraded the country in August, and one level higher than the equivalent grade from Moody’s.

Peru is now rated higher by Fitch than Brazil, and the same as Mexico, although behind LatAm league leader Chile on ‘A+’.