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Whose ratings are they anyway?

By Staff Writer
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Whose ratings are they anyway?

The main story carried by the business news outlets today concerns the ratings agency Standard & Poor (S&P).

Ratings agencies are the guys who work out whether countries and companies are a safe investment or not. The sub prime fiasco has made these guys look adventurous and inexact.

So they are getting conservative and downgrading rather than get caught out again.

S&P downgraded South Africa to negative from stable reports Business Day. This seems to follow a similar downgrading by ratings agency Fitch earlier in the week. The Treasury did not agree with the Fitch downgrade and called the S&P downgrade 'disappointing' and added that the Treasury had no intention of changing our economic policies, not even in the face of a recession.

S&P commented that this would help us after the financial crisis had passed.

This story was also covered by Moneyweb whose experts were not that bothered and did not think that the market was all that bothered either, as everything was under pressure and the rating agencies don't want to get stung again. Also S&P don't even have a dedicated Africa region on their website.

This story was also carried by The Dispatch who reported that the economy will feel the impact of the global slowdown regardless. Business Times also ran with this one stating that the balance of payments pressures and the risk of further currency depreciation with a large current account deficit were factors driving the downgrade. In a related story from The Times Fitch downgraded our banks although they are relatively immune to the financial fallout, it is more in context of a general global slowdown. The Dispatch reported on this as well.

However the ratings agencies did not come out smelling like roses following their dodgy derivative ratings and the BBC reports today that the EU is planning tighter regulation of credit ratings agencies.

Where once whole economies turned on their ratings, now they are being sidelined as investors count the costs of their previous reliance on external ratings agencies.

In other news today the housing market is on a downward trend according to Business Report. This is based on the latest ABSA quarterly housing review. There may be an argument about which stats are being used, but at the end of the day, the housing market is suffering and everybody knows it.

In international news the G20 is meeting in Brazil. Developing countries are pushing for more access to western agricultural markets and developed markets want better access to export to us, says the Business Report. Livemint and The Wall Street Journal both commented on the G20 talks with the BRIC countries wanting a re-organisation of the world financial system and World Bank president Robert Zoellick preferring the BRIC and G7 to engage with each other rather than work at cross purposes. Things are in upheaval and no-one really knows what will happen next, but if you have a budget and stick to it and you increase your proportion of savings then you will be in a better position to ride it all out.
 

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