WM Market Update – April 2017
Global – Growth gains momentum
Global equities advanced in Dollar terms over a broad front during April on the back of positive economic data and a reduction in European geo-political risk as it became apparent that the French election would see the more moderate candidate emerge as the victor. The MSCI World Equity Index returned 1.53% but was outperformed by the MSCI Emerging Markets Index which returned 2.21%, both in Dollar terms. Emerging market performance was enhanced by US Dollar weakness combined with a synchronised improvement in global growth.
Domestic – Winds of change?
Not surprisingly, following the midnight cabinet reshuffle, the expected ratings agencies downgrades followed. Fitch Ratings downgraded South Africa’s Long-Term Foreign- and Local-Currency Issuer Default Ratings to ‘BB+’ from ‘BBB-‘. The outlooks are stable. The issue ratings on South Africa’s senior unsecured foreign- and local-currency bonds have been downgraded to ‘BB+’ from ‘BBB-‘. That means another local-currency debt downgrade by S&P would plunge Rand bonds into junk territory and see them removed from indices including Citigroup Inc.’s World Government Bond Index. S&P’s decision to downgrade SA’s local-currency debt to one notch above junk and its minority foreign-currency debt to junk status has long been anticipated by markets and was largely priced in by the time it was announced.
