London: Fitch And Moody’s on Wednesday downgraded Russia’s sovereign credit rating by six places to “junk” status, saying Western sanctions cast doubt on Russia’s ability to repay its debt and would undermine its economy.
Russian financial market The turmoil has been sparked by sanctions imposed over Russia’s invasion of Ukraine, the largest attack on a European state since World War II. The invasion has sparked a flurry of credit rating moves and dire warnings about the impact on Russia’s economy. S&P downgraded Russia’s rating last week to junk.
This prompted index providers FTSE Russell and MSCI to announce on Wednesday that they would remove Russian equities from all their indexes, after a top MSCI executive earlier this week called Russia’s stock market “uninvestable”. .
FTSE Russell said the decision would be effective from March 7, while MSCI said its decision would be implemented in one phase across all MSCI indexes closing on March 9. MSCI said it is reclassifying the MSCI Russia Index from emerging markets to standalone markets. Situation.
Russia has a weighting of 3.24% in MSCI’s emerging market benchmark and the index provider’s global benchmark has a weighting of about 30 basis points.
The International Finance Institute has predicted double-digit contraction in economic growth this year.
Fitch downgraded Russia from “BBB” to “B” and placed the country’s rating at “Rating Watch Negative”. Moody’s, which last week flagged the possibility of a downgrade, also cut the country’s rating by six places from Baa3 to B3.
“The severity of international sanctions in response to Russia’s military invasion of Ukraine has exacerbated macro-financial stability risks, a major blow to Russia’s credit fundamentals and its ability to service government debt,” Fitch said in a report. can weaken the will.”
Fitch said US and EU sanctions restricting any transactions with Russia’s central bank would “have a much bigger impact on Russia’s credit fundamentals than any previous sanctions,” adding that most of Russia’s international reserves would make the FX unusable for interference.
“The sanctions could also affect Russia’s willingness to pay back its debts,” Fitch warned. “director PutinThe response to put nuclear forces on high alert has made Ukraine less likely to change its course to the degree necessary to reverse increasingly stringent sanctions.
Fitch said it expects further intensification of sanctions on Russian banks.
Moody’s said the scope and severity of the sanctions “exceeded Moody’s initial expectations and will have a material debt impact.”
Fitch said sanctions imposed by Western countries would also undermine Russia’s GDP growth potential, relative to the rating agency’s previous assessment of 1.6%.
Analysts at JPMorgan and elsewhere said on Wednesday that sanctions imposed on Russia significantly increased the country’s chances of defaulting on government debt on the dollar and other international markets.
Russia has responded to the sanctions with a range of measures to strengthen its economic defenses and retaliate against Western sanctions. It raised its prime lending rate to 20%, banned Russian brokers from selling securities held by foreigners, ordered export companies to back the ruble, and said it would stop selling assets to foreign investors. .
The government also plans to tap its National Wealth Fund (NWF), which is a cushion on rainy days, to help counter the restrictions.
Russian financial market The turmoil has been sparked by sanctions imposed over Russia’s invasion of Ukraine, the largest attack on a European state since World War II. The invasion has sparked a flurry of credit rating moves and dire warnings about the impact on Russia’s economy. S&P downgraded Russia’s rating last week to junk.
This prompted index providers FTSE Russell and MSCI to announce on Wednesday that they would remove Russian equities from all their indexes, after a top MSCI executive earlier this week called Russia’s stock market “uninvestable”. .
FTSE Russell said the decision would be effective from March 7, while MSCI said its decision would be implemented in one phase across all MSCI indexes closing on March 9. MSCI said it is reclassifying the MSCI Russia Index from emerging markets to standalone markets. Situation.
Russia has a weighting of 3.24% in MSCI’s emerging market benchmark and the index provider’s global benchmark has a weighting of about 30 basis points.
The International Finance Institute has predicted double-digit contraction in economic growth this year.
Fitch downgraded Russia from “BBB” to “B” and placed the country’s rating at “Rating Watch Negative”. Moody’s, which last week flagged the possibility of a downgrade, also cut the country’s rating by six places from Baa3 to B3.
“The severity of international sanctions in response to Russia’s military invasion of Ukraine has exacerbated macro-financial stability risks, a major blow to Russia’s credit fundamentals and its ability to service government debt,” Fitch said in a report. can weaken the will.”
Fitch said US and EU sanctions restricting any transactions with Russia’s central bank would “have a much bigger impact on Russia’s credit fundamentals than any previous sanctions,” adding that most of Russia’s international reserves would make the FX unusable for interference.
“The sanctions could also affect Russia’s willingness to pay back its debts,” Fitch warned. “director PutinThe response to put nuclear forces on high alert has made Ukraine less likely to change its course to the degree necessary to reverse increasingly stringent sanctions.
Fitch said it expects further intensification of sanctions on Russian banks.
Moody’s said the scope and severity of the sanctions “exceeded Moody’s initial expectations and will have a material debt impact.”
Fitch said sanctions imposed by Western countries would also undermine Russia’s GDP growth potential, relative to the rating agency’s previous assessment of 1.6%.
Analysts at JPMorgan and elsewhere said on Wednesday that sanctions imposed on Russia significantly increased the country’s chances of defaulting on government debt on the dollar and other international markets.
Russia has responded to the sanctions with a range of measures to strengthen its economic defenses and retaliate against Western sanctions. It raised its prime lending rate to 20%, banned Russian brokers from selling securities held by foreigners, ordered export companies to back the ruble, and said it would stop selling assets to foreign investors. .
The government also plans to tap its National Wealth Fund (NWF), which is a cushion on rainy days, to help counter the restrictions.