Cape Town – The decision of Standard & Poor’s (S&P) Global Ratings and Fitch to slash South Africa’s sovereign credit rating to junk is unlikely to signal that the worst is over for South Africa and that the rand could regain lost ground.
Adriaan du Toit from Citi Research said in a company note on Friday that based on the experience of some of South Africa’s emerging market peers that have recently been downgraded to sub-investment grade, there may be conclusions that a country’s currency could regain some ground, following a downgrade.
“We suspect that this is the way that many investors have been interpreting the events unfolding in South Africa over the past two weeks, in other words that the ‘worst’ has happened, political power has shifted and that the rand are therefore beginning to regain ground.”
