April 4, 2017 / 9:32 AM / 5 months ago

EMERGING MARKETS-Rating downgrade hits S.Africa; EM stocks fall

    By Karin Strohecker
    LONDON, April 4 (Reuters) - A credit rating downgrade ramped
up pressure on South Africa's assets on Tuesday, sending the
rand tumbling and bond yields rising as political turmoil in the
country exacerbated investors' overall caution towards riskier
assets.
    South Africa's rand weakened 1 percent against the dollar
       in its seventh straight session in the red, having lost
nearly 12 percent since last Monday when President Jacob Zuma
ordered respected Finance Minister Pravin Gordhan back home from
a trip abroad in a week that culminated in his sacking.
    Gordhan's departure and the rifts in the ANC-led government
prompted S&P Global to cut South Africa's sovereign credit to
'junk', handing it the first downgrade since 2000. Moody's said
later it was placing South Africa on review for downgrade.
            
    "The big question mark is what Fitch does – there is no
specific review date for them," said Simon Quijano-Evans,
emerging markets strategist at Legal & General Investment
Management.
    "They are right at the bottom end of the investment grade
and Moody's still has two notches to go to junk status - most of
the action happens with the second downgrade to 'junk'."
    Bonds also came under pressure with the yield in the local
benchmark           now firmly above 9 percent and eurobond
yields edging higher almost across the whole curve.             
    But emerging assets came under pressure more widely amid a
general risk off mood with investors awaiting cautiously a first
meeting later this week between U.S. President Donald Trump and
Chinese President Xi Jinping and growing uncertainty on Trump's
ability to deliver on his stimulus pledges. 
    In Russia, lower oil prices         and doubts on whether
the central bank would step up currency interventions weighed on
the rouble, which weakened 0.9 percent. The Mexican peso       
nearly matched that fall.
    In Ukraine, dollar-denominated bonds gained across most of
the curve after the International Monetary Fund's executive
board approved another $1 billion loan payment on Monday,
bringing total disbursements to about $8.38 billion under the
$17.5 billion bailout program.             
    Emerging stocks also fell with MSCI's benchmark index down
0.3 percent on the day, dragged down by falls in South Korea
        and Taiwan        . 
    
        
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml

For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
    
     Equities                  Latest    Net Chg  % Chg  % Chg  
                 
                                                     on year    
               
 Morgan Stanley                       
 Emrg Mkt Indx              962.10    -3.05   -0.32  +11.58     
               
 Czech Rep                  980.75    -4.45   -0.45   +6.42     
               
 Poland                    2232.04   +12.16   +0.55  +14.59     
               
 Hungary                  31787.24    -1.16   +0.00   -0.67     
               
 Romania                   8162.58    +6.93   +0.08  +15.21     
               
 Greece                     667.67    +0.35   +0.05   +3.73     
               
 Russia                    1117.89    -5.09   -0.45   -2.99     
               
 South Africa             46044.61  +483.52   +1.06   +4.88     
               
 Turkey                   88330.18  -339.29   -0.38  +13.04     
               
 China                     3222.60   +12.37   +0.39   +3.83     
               
 India                    29910.22  +289.72   +0.98  +12.33     
               
                    
 Currencies              Latest    Prev    Local    Local       
              
                                   close   currency currency    
               
                                           % change % change    
               
                                                    in 2017     
              
 Czech Rep                27.08     27.03   -0.18    -0.28      
             
 Poland                    4.25      4.23   -0.46    +3.54      
             
 Hungary                 308.97    308.34   -0.20    -0.05      
             
 Romania                   4.54      4.55   +0.06    -0.17      
             
 Serbia                  123.65    123.64   -0.01    -0.24      
             
 Russia                   56.58     56.07   -0.90    +8.28      
             
 Kazakhstan              313.09    313.29   +0.06    +6.57      
             
 Ukraine                  27.12     26.98   -0.52    -0.44      
             
 South Africa             13.85     13.69   -1.19    -0.89      
             
 Kenya                   103.10    103.15   +0.05    -0.71      
             
 Israel                    3.64      3.63   -0.28    +5.79      
             
 Turkey                    3.65      3.64   -0.06    -3.27      
             
 China                     6.88      6.88   +0.00    +0.87      
             
 India                    64.96     64.96   -0.00    +4.59      
             
 Brazil                    3.11      3.11   -0.01    +4.46      
             
 Mexico                   18.82     18.66   -0.87   +10.04      
             
                    
 Debt                 Index   Strip Spd  Chg   %Rtn   Index     
               
 Sov'gn Debt          EMBIG   336         2    .00  7 68.67 1   
                
                    
 All data taken from Reuters at 09:07 GMT. Currency percent
change calculated from the daily U.S.                    
 close at 2130 GMT.                    
                
    
    For CENTRAL EUROPE market report, see       
    For TURKISH market report, see      
    For RUSSIAN market report, see         )

 (Additional reporting by Claire Milhench; Editing by Andrew
Bolton)
  

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