Moody’s Investors Service became the first ratings agency to cut Portugal’s credit standing to junk, warning the country may need a second round of rescue funds before it can return to capital markets.
The downgrade on Tuesday was not entirely unexpected and served as a reminder that Europe’s debt troubles extend beyond Greece, which has dominated news headlines over its second financial bailout.
Some economists think Ireland may also need additional support and investors worry Spain and Italy could be next in line for aid.
“It goes to show that this whole crisis isn’t over just yet,” said Jay Bryson, global economist for Wells Fargo Securities in Cape Hatteras, North Carolina. “Even if they cough up some more money for Greece, and that looks like it’s a done deal, it’s not over.”
Moody’s slashed Portugal’s credit rating by four levels, to “Ba2,” causing the debt-laden Iberian country to follow Greece into junk territory below investment grade. Greece is rated much lower, at Caa1.
Portugal in April became the third euro zone country to request a bailout, after Greece and Ireland.
Moody’s cited heightened concerns that Portugal will not be able to fully meet deficit reduction and debt stabilization targets set out in its loan agreement with the EU and IMF.
Portugal is receiving funds from a three-year, 78 billion euro (US$112 billion) EU/IMF bailout program and does not need to issue long-term debt in the market until 2013.
However, Moody’s said there is an increasing probability Portugal will not be able to borrow at sustainable rates in capital markets in the second half of 2013 and for some time thereafter.
There was a “growing risk that Portugal will require a second round of official financing before it can return to the private market and the increasing possibility that private sector creditor participation will be required as a pre-condition,” Moody’s said.
Of the three major ratings agencies, Standard & Poor’s and Fitch Ratings both have Portugal at “BBB-,” the bottom of the investment grade range.
Portugal’s new center-right government said in a statement that Moody’s did not take into account strong political backing for austerity after a June 5 election and an extraordinary tax announced last week.
Unlike the previous minority Socialist government, the new ruling coalition has a comfortable majority in parliament to pass austerity measures and reforms.
It did acknowledge, though, that the rating cut “shows the vulnerability of the country’s economy amid a debt crisis.”
It also reaffirmed commitment to deepening and speeding up austerity measures that the country vowed to implement under its bailout pact, saying a strong macroeconomic adjustment was “the only way to reverse the course and restore confidence.”
The country has to slash its budget deficit to 5.9 percent of GDP this year after overshooting its target last year, when the gap was 9.2 percent, and then reduce it to 3 percent by the end of 2013.
Anthony Thomas, Moody’s analyst for Portugal, said “evidence that Portugal is meeting or indeed exceeding its deficit reduction targets” could be a positive that may lead the agency to change its outlook on the country’s credit rating to stable from negative.
However, he also said the outlook depends a great deal on whether eurozone officials will require private-sector participation when extending new financing to the region’s troubled countries.
Right now, such participation is planned to be only voluntary so as not to cause ratings agencies declaring it a “credit event.”
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
FUTURE PLANS: Although the electric vehicle market is getting more competitive, Hon Hai would stick to its goal of seizing a 5 percent share globally, Young Liu said Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler and supplier of artificial intelligence (AI) servers powered by Nvidia Corp’s chips, yesterday said it has introduced a rotating chief executive structure as part of the company’s efforts to cultivate future leaders and to enhance corporate governance. The 50-year-old contract electronics maker reported sizable revenue of NT$6.16 trillion (US$189.67 billion) last year. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), has been under the control of one man almost since its inception. A rotating CEO system is a rarity among Taiwanese businesses. Hon Hai has given leaders of the company’s six