Sovereign credit ratings in the emerging markets are back on the up on the bank of hoped-for rate cuts, post-Covid recovery, and policy moves in select markets, Reuters reports. The newswire points to Egypt, Turkey, Brazil, Nigeria and Zambia as adding to the growing evidence that there’s a turnaround in ratings after decades of downgrades.

Economies are in a very different place than they were during the pandemic: Three-quarters of sovereign credit rating movements in 2024 have been in a positive direction, while almost all were negative when we were all working from home during the pandemic, according to data from the Bank of America cited by Reuters.

The why: It varies by economy, Fitch Ratings’ Ed Parker told the newswire. Some economies have benefited from a recovery following the pandemic and energy price spikes from Russia’s invasion of Ukraine, while others have had a change of fortunes on the back of policy improvements, and frontier economies are reaping the rewards of their new-found access to debt markets, he added.

In our part of the world: Egypt has had Moody’s, Fitch Ratings, and S&P Global Ratings upgrade its sovereign credit outlook to positive since March 2024 — though none of the “big fbp three” have upgraded Egypt’s credit rating itself.

Good news for sure, but EMs still have a long way to go: Ratings upgrades and better access to debt markets are obviously a positive sign, especially after a long period of high interest rates and a strong USD. But getting too excited about the ratings upgrades risks ignoring long-term trends in developing countries’ debt markets.

MARKETS THIS MORNING-

Major Asian benchmarks slumped into the red this morning after the minutes of the US Fed’s latest meeting were released. Traders and bankers alike are concerned that the central bank is getting “cold feet on possible rate cuts” after data showed inflation was surprisingly stubborn. Of the big Asian indexes, only the Nikkei is in positive territory this morning.

Looking ahead: Nasdaq and S&P futures were up overnight after Nvidia reported record earnings — but futures have the Dow headed for a lower open at the start of trading today. European futures declined overnight.

TASI

12,157

+0.3% (YTD: +1.6%)

MSCI Tadawul 30

1,524

+0.2% (YTD: -1.7%)

NomuC

26,845

-0.3% (YTD: +9.4%)

USD : SAR (SAMA)

3.75 Sell

3.75 Buy

Interest rates

6% repo

5.5% reverse repo

EGX30

27,227

0.0% (YTD: +9.4%)

ADX

8,973

-0.4% (YTD: -6.3%)

DFM

4,058

-0.4% (YTD: -0.1%)

S&P 500

5,307

-0.3% (YTD: +11.3%)

FTSE 100

8,370

-0.6% (YTD: +9.7%)

Euro Stoxx 50

5,025

-0.4% (YTD: +11.1%)

Brent crude

USD 81.90

-1.2%

Natural gas (Nymex)

USD 2.79

-1.9%

Gold

USD 2,406

-0.4%

BTC

USD 69,034

-1.6% (YTD: +64.4%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.3% yesterday on turnover of SAR 5.3 bn. The index is up 1.6% YTD.

In the green: Naseej (+9.8%), Gulf General (+6.7%) and MCDC (+6.0%).

In the red: Amlak (-5.0%), Batic (-4.9%) and Al Jouf (-4.4%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.3% yesterday on turnover of SAR 36.7 mn. The index is up 9.4% YTD.

In the green: Riyadh Steel (+19.4%), Osool and Bakheet (+7.0%) and Naseej Tech (+6.9%).

In the red: Bena (-23.4%), Future Care (-7.6%) and Dar Al Markabah (-6.2%)

CORPORATE ACTIONS-

Shareholders of Tadawul-listed chemicals producer Sahara International Petrochemical Company (Sipchem) approved transferring SAR 2.1 bn in statutory reserve to retained earnings as set in its 2023 financial statements, it said in a disclosure to Tadawul. They also extended the holding period for the 8.2 mn treasury shares for another 10 years from the approval date.

Shareholders of Tadawul-listed jewelry maker L’azurde have approved the board’s recommendation to distribute SAR 17.3 mn in dividends at SAR 0.3 per share for FY 2023, it said in a disclosure to Tadawul. The distribution date is set for Monday, 10 June. They also approved distributing interim dividends bi-annually or on a quarterly basis for FY 2024.

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