|Bid||470.60 x 0|
|Ask||470.90 x 0|
|Day's range||466.70 - 482.50|
|52-week range||334.25 - 739.40|
|Beta (5Y monthly)||1.16|
|PE ratio (TTM)||20.43|
|Earnings date||29 Oct 2020|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||05 Mar 2020|
|1y target est||8.78|
(Bloomberg) -- South Africa fell deeper into junk territory after Moody’s Investors Service and Fitch Ratings lowered the country’s credit ratings on Friday.The ratings cuts come after the coronavirus pandemic pummeled the government’s finances and pushed the economy into its longest recession in almost three decades. Finance Minister Tito Mboweni said on Saturday the downgrades will have immediate implications for borrowing costs and will constrain the fiscal framework.Still, South Africa had already dropped out of the FTSE World Government Bond Index after Moody’s removed the nation’s last investment-grade rating in March. That may reduce the impact of the downgrades, according to Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank.“The market implications of the latest rating action looks more benign,” Khan said in an emailed note. “If anything, reform momentum is looking more positive near term.”Moody’s cut the nation’s foreign- and local-currency ratings to Ba2, two levels below investment grade, from Ba1. The outlook remains negative. Fitch cut its ratings to BB-, three levels below investment grade, from BB, also with a negative outlook.Only five of 23 economists surveyed by Bloomberg predicted Moody’s would lower its rating, while just four out of 21 expected a downgrade from Fitch before the end of the year. The negative outlook on both ratings mean the next moves from these companies could be even further cuts that would signal an increased probability of a default.Wage FreezeThe pandemic has weighed on revenue collection and raised the cost of borrowing. Mboweni’s medium-term budget last month showed plans to pare the government salary bill, which has surged 51% since 2008, as part of an effort to start bringing its debt trajectory down after 2026.However, that wasn’t enough to stave off ratings downgrades until after the February 2021 budget, as many economists had predicted.“The key driver behind the rating downgrade to Ba2 is the further expected weakening in South Africa’s fiscal strength over the medium term,” Moody’s said in a statement. Fitch said in a separate release that “GDP is expected to remain below 2019 levels even in 2022.”The proposed wage freeze risks a backlash from politically influential labor groups that are already in a legal battle with the government to honor an agreed pay deal. If state salaries can’t be cut, there’s limited room for offsetting measures in other expenditure areas. The central bank has signaled it won’t reduce interest rates any further and there’s no room in the budget to increase spending to boost growth.There is “an urgent need for government and its social partners to work together to ensure that we keep the sanctity of the fiscal framework and implement much-needed structural economic reforms to avoid further harm to our sovereign rating,” Mboweni said Saturday.S&P on Friday kept its assessment of South Africa’s foreign-currency debt three levels below investment grade, with a stable outlook.(Updates with Treasury comment from second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Britain believes it has chosen the ideal moment to throw its weight behind a financial innovation that might help save the world. As part of Prime Minister Boris Johnson’s blueprint to fight the climate emergency, the U.K. is exploring the creation of a London-based international market in carbon offsets, carbon credits and derivatives linked to emissions-cutting investments.The plan sounds noble. Should it really take off, you might even be able to reduce your personal emissions by buying an offset when you do environmentally damaging things like fill up your car with gas, or buy a cup of coffee. But betting on this utopian-sounding outcome would be premature.After many previous efforts to spur carbon trading failed amid a lack of clear government policy, this might be one of the better chances to get a market going. Companies that struggle to cut their own carbon footprints could certainly do with a deep, liquid pool of credits they can buy to help them satisfy the demands of increasingly green investors. Xi Jinping’s announcement that China aims to reach carbon neutrality by 2060 and President-elect Joe Biden’s push for a net-zero economy by 2050 could give any embryonic market a jolt. Former Bank of England Governor Mark Carney, now a United Nations climate envoy, thinks a global carbon-offset market should be worth “tens or hundreds of billions” of dollars, many times the current $300 million. And Johnson spies a central role for the City of London as a trading hub, to help cushion the post-Brexit loss of other financial business to the European Union.There’s competition for London, not least from its sparring partners in Brussels. The European Commission is weighing an overhaul of its own emissions-trading scheme, which is already the biggest carbon market. Futures contracts on these carbon-emission allowances trade on the ICE exchange, and the price there has recovered strongly after a sharp correction during the first coronavirus lockdowns.London, however, has a history in cutting-edge finance, a deep talent pool and a strong lead in the trillion-dollar swaps market. It’s a logical place to base the trading of carbon credits, and the derivative-like contracts that companies’ would want to tailor for their individual needs, were the worldwide carbon credit market to take off.Unfortunately, it’s far from certain that it will.First off, the global price for carbon emissions needs to be much higher to get a proper international market going. The current average price of $3 per metric ton reflects the abundance of credits from different countries and the exemptions for polluters. It would probably need to rise to $75-$100.Even with a stronger reference price, there are significant practical obstacles to a reliable and effective carbon market. Common international principles and standards on credits are still missing and the market lacks transparency. Take a reforestation project, for example. Investors would need assurances that the trees are actually being planted and that they’re not double-counted to back other credits.Such is the murkiness of carbon credits that Bill Winters, the Standard Chartered PLC boss who’s assessing the scaling up of the market, says it might end up being rigged just like interest-rate benchmarks. An independent agency could try to enforce standards, but vetting the supply of credits and cross-border purchases would be a big endeavor. Twenty countries — led by Indonesia, Brazil and the Democratic Republic of Congo — account for most of the potential supply of credits, while much of the demand comes from Europe and the U.S.Fraud and money laundering would be an issue. The temptation for traders to get rich off a fictitious forest might be too great to overcome.With the U.K. leaving the EU, there will have to be a decision on melding with existing European standards or formulating a wider, more flexible global alternative that can build critical mass. Perhaps London and Europe could try to coexist. But for now a global carbon credit system is a mere concept, while the world’s leaders decide whether they want to work together.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Another Indian bank has failed, the third collapse of a major deposit-taking institution in 15 months and the first since the onset of the coronavirus pandemic. But instead of allowing a zombie lender to linger after a half-baked rescue, the central bank has wisely decided to put Lakshmi Vilas Bank Ltd. out of its misery. Better still, it’s called upon a foreign institution to take over the assets and liabilities. That should stoke interest of other global banks.The moth-eaten LVB will cease to exist, its equity completely wiped out. Only its deposits will appear on the books of the India unit of DBS Group Holdings Ltd., Singapore’s biggest bank. This is a much cleaner solution than how the Reserve Bank of India handled the implosion last September of Punjab & Maharashtra Co-operative Bank Ltd., whose loan book was basically tied to one bankrupt shantytown developer. The scam-tainted lender is trying to sell itself, though it’s unclear why anyone would touch it with a barge pole. More than a year later, larger PMC depositors still remain trapped, under orders from the RBI. The refusal to give a decent burial to a failed institution was visible in the messy bailout of Yes Bank Ltd. in March. Without wiping out the existing equity, authorities permanently wrote down $1.2 billion of Yes Bank’s liabilities, the first complete loss imposed by any country on Additional Tier 1 bondholders. They then leaned on government-controlled State Bank of India to inject some more capital. Once a major corporate lender, Yes was destroyed from within by its previous management’s dubious underwriting. Whether it has finally been saved may not be known before March 2022. Until then, Covid-19 has provided a convenient regulatory cover to delay recognizing stressed assets.LVB was struggling to survive even before the March lockdown. The resulting dislocation dragged down the Tier 1 capital ratio to minus 1.83%, putting the lender beyond redemption. By swallowing assets and liabilities of the 94-year-lender, DBS gets 563 branches, 974 ATMs and a $1.6 billion franchise in retail liabilities.The Singapore institution was the second foreign bank after SBM Group of Mauritius to turn its India operations into a wholly owned subsidiary. Yet, DBS Bank India Ltd. hasn’t really expanded outside major metropolises. LVB will help it penetrate deeper into the more industrialized southern state of Tamil Nadu, where Singapore’s ethnic Indian minority has an ancestral connection. Faster growth in the country could even open up the possibility of a stock-market listing in Mumbai for the India subsidiary, says Bloomberg Intelligence analyst Diksha Gera.The deal nixes speculation that the RBI might turn to the state-run Punjab National Bank to rescue LVB if it couldn’t find an acceptable rescuer on its own.(2) Punjab National, allegedly taken for a $2.1 billion fake loan-guarantee ride by an uncle-nephew jeweler duo, is hardly the picture of operational strength and financial vitality depositors want to see in a white knight.To that extent, the RBI’s decision to broaden the search beyond a “national team” is a good sign. It shows that the regulator wants control of banking assets to be in strong hands. If they incorporate locally, overseas institutions will be considered at (almost) par with homegrown ones. DBS’s rivals like Standard Chartered Plc, Citigroup Inc. and HSBC Holdings Plc have deeper India ties and bigger branch networks. But their interest in establishing local subsidiaries never perked up because of the stipulation that 25% of new branches in any year should be in unbanked rural areas. However, now that DBS is getting to build scale in India’s capital-starved banking system via an amalgamation blessed by the regulator, there may be similar opportunities in store for others, particularly HSBC.The British bank needs to cut its excessive reliance on the Hong Kong market, where it’s caught in the middle of a financial cold war between China and the U.S. DBS Chief Executive Officer Piyush Gupta has put the balance sheet of the bank’s Indian unit to use and promised to bring in an extra $336 million in capital. Noel Quinn, his counterpart at HSBC, should take time off from his cost-cutting agenda and weigh the opportunity. LVB was just a small private-sector bank, but the Indian government also wants to consolidate its 12 state-run lenders into four. There could be an M&A prize for becoming Indian.(Updates with possibility of a stock-market listing in Mumbai, 5th paragraph.The 3rd paragraph in an earlier version was corrected to show Yes Bank bailout was this March. )(1) LVB tried to sell itself, unsuccessfully, to non-bank financiers.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.