Big Financial Losses On The Cards If There's Another Downgrade

Reports suggest SA could lost R150 billion if another downgrade happens.
Siphiwe Sibeko / Reuters

It's a wait and see game for markets and investors following the decision by ratings agency Fitch to downgrade South Africa to junk status, while an estimated R150 billion of forced selling by foreign investors awaits South Africa should another downgrade take place.

This is according to Business Day, which reported on Monday that markets are waiting to see if Fitch's decision will set off a chain of events.

On Friday, Fitch downgraded South Africa to junk status, following the decision by Standard & Poor's to do the same, a week earlier.

The CEO Initiative told Business Day that the wellbeing of South Africans had been dealt a blow by the downgrades. The Associatino of Black Securities and Investment Professionals said the ratings agencies had been too harsh.

According to the paper, foreign investors hold more than a third of South Africa's Rand debt, which means that many would have to sell if another downgrade took place.

The World Government Bond index reportedly requires investment grade local currency ratings from S&P and ratings agency, Moody's.

Barclays Capital group treasurer Deon Raju told Business Day that, at a conservative estimate, $5 billion was at risk if there was another downgrade.


What's Hot