S&P upgrades SA’s credit rating, mkts cheer

JOHANNESBURG – Standard & Poor’s upgraded South Africa’s credit rating on Monday, giving a vote of confidence to the continent’s largest economy which cheered domestic markets and raised hopes for increased investment.

The news hoisted the rand to a two-month peak of 6,5050/dollar – its best level since late May, according to Reuters data. Government bonds firmed, with yields on the main R153 stock down 5,5 basis points to 7,495 per cent.The Johannesburg top-40 index of bluechip stocks rose 0,31 per cent.Equity traders said the upgrade underpinned confidence in stocks focused on the South African market, such as banks and retailers.Standard & Poor’s raised its long-term foreign currency and local currency credit ratings on South Africa and gave a stable outlook based on improved macroeconomic stability.The long-term foreign currency rating was lifted one notch to ‘BBB+’ from ‘BBB’ while the local currency rating was lifted one notch to ‘A+’ from ‘A’.But it had words of caution about aspects of life in the country, which is plagued by social problems.S&P’s move was seen as a catch-up play vis-a-vis its ratings rival Moody’s Investors Service which already rated South Africa at Baa1.S&P’s move brings it even with Moody’s, placing South Africa three notches above junk status.Moody’s Investors Service said on Monday South Africa’s sovereign credit rating is appropriate for the next 12 to 18 months at three notches above junk status at ‘Baa1’.Moody’s upgraded South Africa in January, at the time citing an improved external liquidity position.Standard & Poor’s said South Africa had earned its latest stamp of approval.”The upgrade reflects South Africa’s strong track record of macroeconomic management and improved prospects of sustainable higher GDP growth rates,” Standard & Poor’s sovereign credit analyst Beatriz Merino said in a statement.South Africa has been lauded for its commitment to fiscal prudence and for policies such as inflation targeting which have stabilised the economy and helped to quicken growth, which at 3,7 per cent last year was its briskest pace since 2000.”It (the upgrade) should help long-term growth in South Africa if interest rates are lower because of resulting rand strength.It will also help sustain that growth by bringing in more foreign direct investment,” said Mike Schussler, an economist at brokerage firm T-sec.But South Africa’s ratings are constrained by severe structural weaknesses, with S&P highlighting income disparities, poverty, very high unemployment and an HIV/AIDS pandemic which is striking down much of the workforce.National Treasury director general Lesetja Kganyago the government had policies in place to deal with its huge social problems and that there was a strong political commitment to raise economic growth above six per cent per year.”The structural issues are nothing new.We do believe that we have got policies in place and plans to address those issues raised by S&P,” Kganyago said.-Nampa-ReutersGovernment bonds firmed, with yields on the main R153 stock down 5,5 basis points to 7,495 per cent.The Johannesburg top-40 index of bluechip stocks rose 0,31 per cent.Equity traders said the upgrade underpinned confidence in stocks focused on the South African market, such as banks and retailers.Standard & Poor’s raised its long-term foreign currency and local currency credit ratings on South Africa and gave a stable outlook based on improved macroeconomic stability.The long-term foreign currency rating was lifted one notch to ‘BBB+’ from ‘BBB’ while the local currency rating was lifted one notch to ‘A+’ from ‘A’.But it had words of caution about aspects of life in the country, which is plagued by social problems.S&P’s move was seen as a catch-up play vis-a-vis its ratings rival Moody’s Investors Service which already rated South Africa at Baa1.S&P’s move brings it even with Moody’s, placing South Africa three notches above junk status.Moody’s Investors Service said on Monday South Africa’s sovereign credit rating is appropriate for the next 12 to 18 months at three notches above junk status at ‘Baa1’.Moody’s upgraded South Africa in January, at the time citing an improved external liquidity position.Standard & Poor’s said South Africa had earned its latest stamp of approval.”The upgrade reflects South Africa’s strong track record of macroeconomic management and improved prospects of sustainable higher GDP growth rates,” Standard & Poor’s sovereign credit analyst Beatriz Merino said in a statement.South Africa has been lauded for its commitment to fiscal prudence and for policies such as inflation targeting which have stabilised the economy and helped to quicken growth, which at 3,7 per cent last year was its briskest pace since 2000.”It (the upgrade) should help long-term growth in South Africa if interest rates are lower because of resulting rand strength.It will also help sustain that growth by bringing in more foreign direct investment,” said Mike Schussler, an economist at brokerage firm T-sec.But South Africa’s ratings are constrained by severe structural weaknesses, with S&P highlighting income disparities, poverty, very high unemployment and an HIV/AIDS pandemic which is striking down much of the workforce.National Treasury director general Lesetja Kganyago the government had policies in place to deal with its huge social problems and that there was a strong political commitment to raise economic growth above six per cent per year.”The structural issues are nothing new.We do believe that we have got policies in place and plans to address those issues raised by S&P,” Kganyago said.-Nampa-Reuters