Moody’s downgraded Russia to “junk” level – RBC

Moody's downgraded Russia to "junk" level – RBC

According to the official report of Moody’s, to the rating Ba1, which is considered “junk” rating downgraded to Baa3.

The reasons for the downgrade Moody’s calls poor prospects of the Russian economy (the agency expects “deep recession” in 2015 and continued decline in 2016), the expected further weakening of fiscal sustainability and foreign exchange reserves, and, finally, “unpredictable political dynamics».

Moody’s notes are still “very low, but growing” risk of government decisions, which jeopardize the timely payment of external debt.

The negative rating outlook Moody’s explains that the balance of economic, political and financial risks is not in favor of Russia. For example, the agency sees more likely that against Russia in the coming months will be imposed additional sanctions, rather than weakened existing.

Commenting Interfax agency’s decision, Finance Minister Anton Siluanov called the new estimate “prohibitively negative” and politicized.

It is stated that the rating committee Moody’s was convened to discuss the ranking February 17

January 26 another rating agency, Standard & amp; Poor’s (S & amp; P), downgraded the sovereign rating of Russia’s obligations in hard currency to BB +, the first mark in the “junk” (non-investment) category.

During the February 20 market rumors that Moody’s may downgrade Russia in the coming days, but economists polled by RBC suggested that this would happen in the second quarter. On the eve of customers “Renaissance Capital” received a note from the trader, which stated that foreigners are selling Russian stocks for fear of imminent downgrade, RBC said two sources in the investment company.

Publicly Chief Economist “Renaissance Capital” in Russia and CIS Oleg Kuzmin reported that the revision of Russia’s rating by Moody’s would expect in the second quarter of this year. “The agency revised the rating recently, now the objective prerequisites for the downgrade is not: the price of oil have grown, the situation in Ukraine began to stabilize. If the situation does not deteriorate, the Moody’s may leave a rating at the same level, “he said on the eve of.

« On the one hand, current valuations reflect the new situation, because the market is discussing it for several months and the players had time prepare, “- says the managing director of Arbat Capital Julia Bushueva. On the other hand, she says, the downgrade of the two agencies still lead to a forced sale, if that in view of the low liquidity of the market will slump, “I would use it to buy high-quality corporate bonds, such as” LUKOIL “and” Severstal “.

«Of course the first move in the ruble will be negative, but the ruble is now more dependent on oil prices, rather than the decisions of rating agencies,” – says portfolio manager of the Criminal Code “Capital” Dmitry Postolenko. According to him, the timing is unexpected, but the fact that the future of the downgrade by Moody’s was almost obvious to all. “Most of the foreigners, for which it is important to the existence of two securities investment ratings, is already out of the Russian market”, – said Postolenko.

«The majority of Russian traders waiting for this moment as an opportunity to cheaply purchase. Too many traders, therefore a serious fall will not work “- he said.

Postolenko added that to a greater extent on the news react dollar sovereign bonds, they can be purely technical sales.

Moody’s analysts suggest (and make this accent) that makes the situation worse decisions and actions of the authorities will grow in progression, that is, in the active position of the government on all issues, including the anti-crisis measures, they see the contributing factors to the failure, the general director of the “Expert RA “Paul Samiev. In his opinion, Moody’s does not believe in the managerial and economic decisions, even inaction considered the best option: it is their basic premise, which, of course, has a political component. “It’s like saying,” This man is now quickly run towards the pit and, without slowing down, fell into it, and who said that it will run in the direction of the pit “, – says Samiev.

“The decision looks pretty sudden (or released earlier expectations). Most experts tend to believe that the revision of the ratings of the Russian Federation by Moody’s is likely before the end of March – the report says analyst IK “Finam” Anton Soroko issued shortly after the news at night from 20 to 21 February. On the other hand, information about the downgrade came on the eve of a long weekend in Russia, that is, investors will be able to respond to it on the Russian sites not earlier Tuesday, and to the point, and some emotions can lie down, and the situation on the world markets change significantly, wrote forty. In his opinion, the government and the Central Bank leeway to get it to match their action to prevent a collapse in the domestic market: in particular, they can be taken steps to repurchase from the market government and corporate bonds, on which the reduction is most adversely affect ratings .

The key consequence of the downgrade to “junk” by two rating agencies of the three may be an exception from the Russian market index Barclays Global Aggregate – one of the leading bond indices, which are guided many funds. In the composition of the index is both ruble and foreign currency government bonds, Russian, and Eurobonds of Russian companies. Russia “weighs” in the index of 0.7%, which corresponds to approximately $ 140 billion, according to Reuters last month.

Under the sale of government securities may fall in rubles and dollars, totaling nearly $ 6 billion, it follows from Report JPMorgan, drawn up in January. “According to our estimates, if Moody’s or Fitch downgraded the ratings to sub-investment level, this could lead to the sale of foreign currency government securities by $ 4.66 billion and $ 1.1 billion in federal loan bonds”, – stated in the report of the research department of JPMorgan.