South Africa will confront the threat of a US$7 billion debt selloff this week as it awaits two concurrent judgements on its credit status.
Opinion among economists is divided as to how stark a danger that is. Fifty-six percent of respondents in a Bloomberg survey said S&P Global Ratings will reduce its assessment on rand-denominated debt to the highest non-investment grade tomorrow.
Moody’s Investors Service, which is scheduled to make a decision, is likely leave it unchanged, according to three-quarters of those asked.
Should both companies cut, rand debt would fall out of gauges, including Citigroup Inc’s World Government Bond Index, sparking outflows of 80 billion to 100 billion rand, Citigroup economist Gina Schoeman said.
This would raise borrowing costs for the nation that is selling more debt to plug a widening budget gap.
Conflict in the ruling African National Congress (ANC) in the run-up to its leadership election next month has hamstrung efforts to bolster the Africa’s most-industrialized economy, which had its second recession in less than a decade earlier this year.
Business confidence is near the lowest in more than three decades amid allegations of corruption against state companies’ managers and politicians including South African President Jacob Zuma.
“Given the fraught political context in which South Africa finds itself, alongside the negative repercussions of downgrades in triggering ejection from key bond indices, we believe that the rating agencies will not rush to cement decisions to downgrade this month,” said Phoenix Kalen, director for emerging-markets strategy at Societe Generale SA in London.
The sustainability of the nation’s debt will be at risk unless government presents a credible fiscal-consolidation plan next year, Moody’s said last month after the mid-term budget.
While the outcome of the ANC’s elective conference next month will be of interest to ratings companies, it is the February budget that they will be watching for clues on the country’s debt direction, Investec Bank Ltd chief economist Annabel Bishop said.
“The budget will provide the fiscal detail that was lacking in the 2017 medium-term budget policy statement, which is needed in assessing South Africa’s creditworthiness,” she said. “The likelihood has increased for South Africa to lose its remaining investment-grade ratings.”
Investors are pricing in a downgrade of South Africa’s debt, with yields on dollar securities surpassing those of lower-rated countries such as Brazil and Russia.
South Africa’s US currency bonds due in September 2027 yield 5.08 percent.
Still, investors’ search for higher yields could help counter some of the expected outflows, Schoeman said.
S&P and Fitch Ratings Ltd both rate South Africa’s foreign-currency debt at the highest non-investment grade. They lowered their assessments within a week of Zuma’s March 31 replacement of then-South African minister of finance Pravin Gordhan with Malusi Gigaba.
Moody’s, which has South Africa’s foreign-currency rating at the lowest investment grade, is not going to lower its assessment, 10 of 16 respondents in the Bloomberg survey said.
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
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”