The international rating agency Standard & amp; Poor’s downgraded Russia to “junk” level to the level «BB +». This was reported by Bloomberg.
The flexibility of monetary policy has become more limited, and growth prospects have deteriorated, the agency said. S & amp; P gives the ratings “negative” outlook – external and internal resources of the budget will be reduced due to increased external pressure and an increase in state support for the economy, said the agency.
The agency notes that in December 2014 the central bank raised key rate by 750 basis points to 17%. “This was supposed to stop the sharp depreciation of the ruble and curb inflation. Ruble briefly strengthened against the dollar, but since then he has continued to fall in price, reaching about 66 rubles to the dollar (as of January 26, 2015), compared with about 35 [rubles ./$ ] a year ago, “- said the agency. In the S & amp; P expects that in the current environment will be reduced lending to the economy, which in the future is likely to undermine economic growth.
The expected rate of inflation, according to the S & amp; P, in 2015 will be higher than 10%. “We expect that the quality of assets in the financial system, taking into account the weakening of the ruble, the limited access of key areas of the economy to international capital markets due to sanctions, as well as the economic downturn will continue to deteriorate,” – predicted in the Standard & amp; Poor’s.
In this case, the agency believes that Russia is “muted projected growth” of 0.5% each year over 2015-2018. The next revision of the country’s credit rating is scheduled for April 17, 2015.
The representative of the Ministry of Economic Development declined to comment, saying that the position of the Ministry of previously formulated Minister Alexei Ulyukayev. Last Wednesday, at a meeting with the president he called “illegal” decrease Russia’s sovereign ratings by rating agencies.
In the first minutes after the announcement of the news S & amp; P downgrade in trading on the Moscow stock exchange rate of the dollar rose above 68 rubles, euro reached 77 rubles. At 21:12 MSK dollar on the Moscow Stock Exchange rose to the level of 68.46 rubles. At the same time, the euro strengthened to 76.96 rubles.
The expected decision
«The market had expected this decision, so strong influence on the ruble bond prices and we do not expect short-term volatility will. In our favor is played by the fact that the other two agencies – Fitch and Moody’s – yet retain Russia’s rating to investment grade, making covenants many Russian borrowers will not be violated. Will be critical if they also lowered the ratings. If oil prices continue to decline, will be an escalation of the conflict in Ukraine, the downgrade of the other agencies is quite possible. But this will not happen until the second quarter, as these agencies have revised rating of Russia recently, “- said RBC chief economist for Russia and CIS countries” Renaissance Capital “Oleg Kuzmin.
The downgrade was expected, says chief economist Russia and CIS Bank of America Merrill Lynch. Vladimir Osakovski. “These expectations were laid in the cost of Russian assets that are not traded at BBB-, and much lower,” – says Osakovski. According to him, tomorrow we can expect a negative reaction of the Russian market as investors who had the mandate to buy risky assets will have to leave.
«In the near future we are waiting for the forced sale. Yield sovereign bonds tomorrow may grow by 50-60 basis points, “- predicts Osakovski. The decision on the downgrade is likely taken without regard to the possibility of new sanctions against Russia. If sanctions will still be introduced, Russia’s sovereign rating could be downgraded even further, says Osakovski. “But this will not happen right away,” – says an economist.
«Basically it is expected fact, and he was expected for a long time, two weeks ago. Of course, this is definitely bad news, because it would mean that in the short term, many Russian stocks and bonds will be under pressure, “- says chief economist Vladimir Tikhomirov BCS. According to him, many of the funds will be forced to and will endeavor to get rid of the Russian positions. “In the long term, this is bad news, because even if the situation is political, geopolitical, economic stabilizes and begins to improve, upgrade usually takes some time – says the economist. – This means that even in the case of the opening of the global credit markets for Russian companies and banks access to them is largely restricted, or the cost of borrowing will be prohibitively high ».
According to Tikhomirov, will downgrade and certain pressure on the ruble. “We can assume that foreign investors will increasingly get rid of Russian securities, including ruble-denominated, and try to withdraw money from Russia. Therefore, it will increase the demand for currency is not only on the part of Russian companies and banks, which pay for the debts, but also on the part of foreign investors “, – said Tikhomirov.
The most painful decline in Russia’s credit rating will be for the foreign exchange market , says the chief economist at Alfa Bank, Natalia Orlova. “The downgrade makes the cost of external borrowing for the Ministry of Finance is very expensive. In this situation, the additional depreciation of the ruble could become an attractive source of replenishment. Price downgrade – a devaluation of the ruble by 3-5%, “- says Orlov.
The market’s reaction to the downgrade will be moderate, says chief economist at AFK” Sistema “Evgeny Nadorshin. “Part of the response to the expectation of the news we’ve seen in the evening. You have to be naïve to believe in something incredibly good for Russia, given the problems in the foreign policy front, the sharp fall in oil prices and a decline in well-being, “- he said.
According to the expert, Russia is now the national debt is small in relation to GDP, but the anti-crisis plan and recapitalization of banks through the OFZ will mean that will change the proportion of the ratio of debt to GDP and private debt will go to the state. “Count on the fact that the rating will not be lowered, it was extremely naive. It was only a matter of time “, – says Nadorshin.
« Against the background of what we saw in Ukraine in recent days, downgrade – this is an additional negative for the short-term prospects in terms of the ruble. Already we see the collapse of the ruble strengthening in OTC trading. Tomorrow, obviously, the market will play down. But we believe that global sales will not, because the market has previously been stored for a downgrade, “- said RBC Dmitry Polevoy from ING.
Director of Corporate rating agency S & amp; P Alexander Gryaznov said RBC that the S & amp ; P raised the credit rating on review of a number of companies together with Russia’s sovereign rating. Decision thereon shall be taken before the end of January, he added.
«In some of the companies directly tied to the rating of the sovereign, while others – not. For example, a rating of “Norilsk Nickel” will not be affected, the company, in our opinion, can survive in a situation of default Russia. The “Rosneft” with high probability rating will be reviewed following the sovereign, in a situation with “Gazprom”, we will further analyze the company’s ability to manage the risks of negative intervention from the government, “- said Gryaznov.
« A very limited number of companies have covenants linked to the rating level and, as a rule, they are activated when the rating is lowered by at least two of the three rating agencies. And not always a requirement for early repayment, often simply is an increase in the cost of the [loan], “- he added.
Waiting in January
The agency has sent Russia’s sovereign credit rating on review 23 December. “We are revising our assessment of the flexibility of monetary policy in Russia and the impact of economic weakness on its financial system,” – said the agency.
His decision to explain the agency, including “sharp decline” the flexibility of monetary policy . In this Standard & amp; Poor’s reported a 50 per cent probability of a downgrade over the next 90 days. Prior to this, long-term and short-term sovereign foreign currency ratings were on the mark «BBB- / A-3″ in the national currency – at the level «BBB / A-2 ‘. In October 2014 the agency has affirmed Russia’s sovereign rating on borrowings in foreign currency BBB- c «negative” outlook.
The respondents RBC analysts and economists Sberbank Investment Research, «Uralsib Capital” and FG “BCS” expected revision of the rating further 16 of January. However, the same day the agency said that the decision will be made before the end of January. Economic Development Minister Alexei Ulyukayev considered likely downgrade of Russia “high».
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