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S. Africa: JP Morgan cuts local bond exposure citing rating risks et al

S. Africa: JP Morgan cuts local bond exposure citing rating risks et al

South Africa

America’s multinational investment bank, JP Morgan has reduced its exposure to South African local bonds.

The financial services company cites a dwindling fiscal outlook and flagged risks over its expectations that Moody’s would not change its rating in the near term.

JP Morgan said it had taken profit on its overweight local bond position which it had held since January to move to medium weight.

The fiscal outlook looks significantly more challenging than we previously thought, and we now see risks for a 5.5% of GDP fiscal deficit this year.

In foreign exchange, the bank said it had entered an underweight position on the South African rand, citing expensive valuations.

In a note to clients, Foreign Exchange Strategist at JP Morgan, Anezka Christovova said “the fiscal outlook looks significantly more challenging than we previously thought, and we now see risks for a 5.5% of GDP fiscal deficit this year.”

Asked about Moody’s credit rating on the Southern African nation, Christovova said JP Morgan’s assumption of no ratings action in the near term could be challenged.

Reuters

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