Reuters 1-26-2015: Thomas Grove and Darya Korsunskaya: S & P Downgrades Russias Sovereign Credit Rating to Junk. (Reuters) - Ratings agency S&P cut Russias sovereign credit rating to junk status on Monday, bringing it below investment grade for the first time in a decade. Warning of difficult times ahead for Russias economy, S&P said it had cut the rating from BBB- to BB+ and that Russias economic growth prospects, hit by low oil prices and Western sanctions over the Ukraine crisis, had worsened. The rouble weakened to 68.65 against the dollar RUBUTSTN=MCX, more than 6 percent lower than the previous close on the Moscow Exchange, and the cost of insuring Russian sovereign debt for five years rose, in a sign of investors concern. The downgrade throws into stark relief the severity of Russias financial and economic crisis, said Nicholas Spiro, managing director at Spiro Sovereign Strategy in London. Its going to make it more difficult for large corporates and banks to refinance themselves, at a time when ratings agencies clearly have doubts about the macroeconomic and external environment for Russia. The decision could not only harm Russias image among investors but push up its borrowing costs, as many mainstream investment and pension funds have rules preventing them from buying anything not classed as investment grade. Other rating agencies could follow suit by downgrading Russian sovereign debt to what some consider junk territory, and there could eventually be a political impact on President Vladimir Putin if the economic crisis keeps worsening. But Finance Minister Anton Siluanov played down the situation. The decision taken shows the excessive pessimism of the agency. It fails to consider a series of factors which characterize the strong side of the Russian economy: the accumulation of large international reserves, including in the sovereign funds, he said. He said capital markets had factored in the downgrade and it should have no serious additional effects on them. S&P had warned, in late December, that it could deprive Russia of its investment-grade credit rating as soon as mid-January, following a rapid deterioration of the countrys monetary flexibility and a weakening economy. MORE SANCTIONS? (RUSSIA MUST GET AN HONEST INCOME TAX SYSTEM, BASED ON ABILITY TO PAY OR GET THE ROBIN HOOD TAX TO PAY OFF ANY PRIVATE EQUITY OR HEDGE FUNDS THAT THEY SHOULD NOT HAVE GOTTEN INVOLVED WITH. THEY SHOULD HAVE REMEMBERED HISTORY WHEN JOSEPH STALIN WAS INVITED TO PARTICIPATE IN THE BRETTON WOODS CONFERENCE ALONG WITH 44 OTHER COUNTRIES AND THAT THE WORLD SHOULD STAY ON A GOLD STANDARD WHICH IS A REAL ASSET SUCH AS SILVER, LAND AND THE GRAIN COMMODITIES AS WELL AS OIL. THE GROWING, UNREGULATED, TOXIC DERIVATIVES WILL RUIN THE CURRENCIES OF ALL THE WORLD MARKETS.!!
Posted on: Tue, 27 Jan 2015 16:22:54 +0000
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