S.A. creeps one step closer to junk status

Fitch ratings agency quietly downgraded South Africa’s local currency Long – Term Issuer Default Rating to BBB – with a stable outlook, aligning it with the foreign currency rating , as one notch above junk status. This was due to the rating agency making changes to its sovereign methodology, consequently leading to 22 other countries also experiencing sovereign downgrades. The review in the criteria means that Fitch’s foreign and local rating will now move in unison, increasing the impact of a sovereign downgrade. Inclusion in global indices , such as the JP Morgan Global Bond Index , is dependent on the local currency rating and should South Africa be given junk status in local currency it would fall off such an index triggering outflows especially from passive investors .

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