JOHANNESBURG – There’s still a month to go until Moody’s Investors Service reviews South Africa’s sovereign rating, but foreign investors aren’t taking chances.
Overseas ownership of South African government debt fell to 37 percent of the total at the end of August, from as high as 43 percent in March 2018, according to National Treasury data. That’s the lowest level since February 2017, suggesting some investors aren’t waiting for Moody’s to downgrade the country to junk – a move which would see it removed from Citigroup’s World Government Bond Index, sparking forced sales by investors who track the gauge.
That’s despite the fact the South Africa’s yields are the highest in the WGBI, which requires an investment-grade rating from either Moody’s or S&P Ratings and is tracked by investors overseeing as much as $3 trillion (R46 trillion).
Moody’s is the only major company to rate South Africa’s debt at investment level after S&P Global Ratings and Fitch Ratings cut their assessments to junk in 2017.
“Investors who would be forced sellers in a downgrade, some of them have sold,” said Edwin Gutierrez, London-based head of emerging-market sovereign debt at Aberdeen Asset Management. “Ramaphoria clearly has died,” he said, referring to a term coined to describe investor confidence after President Cyril Ramaphosa took office in February 2018.