With about ZAR72bn in senior unsecured bank debt maturing in 2017 and new Basel III requirements being phased in January 2018, analysts are forecasting an uptick in senior and subordinated issuance in South Africa through 2017 – a welcome change from relatively subdued volumes seen last year.
Brazil’s economic team has set itself the goal of reclaiming Brazil’s investment grade rating. Some believe, however, that the government should not give so much importance to the rating agencies. After all, they failed to predict the global crisis of the previous decade.
As the risk of emerging market capital outflows continues to increases, EM government have become more sensitive to unfavourable reports by international institutions.
No crisis lasts forever. But the present one in Brazil is testing the patience of everyone. GDP has contracted now for seven straight quarters, after a 2014 that was largely lethargic in terms of output. Nor is there any discussion of an inflection point to a cyclical upturn in activity. The only thing on the horizon is economic stabilisation.
Why would Latin America Structured Finance Advisors (LASFA) write an article that airs the dirty laundry for the Brazilian Asset-backed Security market (ABS market or ABS) when it is currently seeking investors for this market? Because many foreign investors are lured by the high interest rates offered in Brazil’s local credit markets and this is a discussion that any investor needs to consider when evaluating an investment in Brazilian ABS, which is undoubtedly risky.
Moody’s Baa2 rating for the €288mn Euro-denominated bond to finance a state-of-the-art hospital campus in Elazig reaffirms the success of Turkey’s healthcare development program funded through PPPs over the last decade, and could set the stage for a project finance surge in the country.
South Africa’s expected downgrade is unlikely to significantly rock the markets as they are likely to have pre-empted the rating agencies’ decision, factoring in a likely downgrade. Nevertheless, there will be some short-term volatility, but relatively strong fundamentals, low liabilities and a tentatively improving rand mean that the country’s debt could be a worthwhile buy when the downgrade comes.
Opinion is divided about the reasons behind Turkey’s recent success on the international debt markets, but questions remain over the country’s long-term investment potential.
The present state of South African politics will contribute to the country losing its investment grade rating. Although the markets have already priced in a sovereign downgrade to sub-investment grade, recent political events surrounding the country’s Minister of Finance are still causing volatility in South African bonds and the rand.
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