Most analysts expect South Africa to lose its final investment-grade rating. Moody’s Investors Service cut its outlook to negative on November 1. That followed Finance Minister Tito Mboweni’s budget statement, which showed the government’s financial situation deteriorating rapidly.
The gloomiest outlook says it would trigger more than $10 billion of money outflow and cause the Rand to weaken to its lowest level in almost four years.
Some analysts say investors had already priced in a downgrade and South African assets may even rise in the aftermath.
If Moody’s does downgrade South Africa, Rand bonds will be excluded from the World Government Bond Index. This comprises 14 currencies including the dollar and yen, and has about $3 trillion tracking it says the Bank of New York Mellon. Foreign investors own 37%, (about R780 billion) of South Africa’s local-currency bonds, according to National Treasury data figures.
Edited for length and style