People
&Markets
IN BRIEF
Australia
S&P revises AAA outlook to stableS&P has revised its AAA outlook for the
COMMONWEALTH OF AUSTRALIA to stable from
negative, citing the country’s improved fiscal
prospects.
The move returns Australia to the coveted status
of being rated Triple A with stable outlooks by
all three main ratings agencies.
S&P had placed Australia on negative outlook,
which traditionally means a one-in-three chance
of a ratings downgrade within two years, back
in July 2016.
“We are revising the rating outlook on Australia
to negative from stable because we believe that
without remedial action the government’s fiscal
stance may no longer be compatible with the
country’s high level of external indebtedness,”
the agency said at the time.
Any S&P sovereign downgrade to AA+ would
automatically trigger a one-notch cut in the
major banks’ ratings to A+ from AA– and
potentially add 5bp–10bp to their offshore
borrowing costs, syndication managers suggest.
In last Friday’s update S&P said: “the stable
outlook reflects our expectations that the
general government fiscal balance will return to
surplus by the early 2020s”.
S&P expects Australian property prices to
continue their orderly unwind, and that this
won’t weigh heavily on consumer spending and
the financial system’s asset quality.
“Australia’s weak external position means that
its other sovereign credit factors, including the
fiscal factors, need to be strong to keep the
sovereign rating at the highest level on our
scale,” according to S&P.
It sees a stronger fiscal position as a strong
buffer to absorb the consequences of an abrupt
weakening of the housing market and thevulnerabilities that event could bring to financial
stability.
Nine other countries are rated Aaa/AAA/AAA:
Canada, Denmark, Germany, Luxembourg, the
Netherlands, Norway, Singapore, Sweden and
Switzerland.1MDB
Najib charged by prosecutorsMalaysian prosecutors charged former Prime
Minister Najib Razak with 21 counts of money
laundering and four counts of abuse of power
last Thursday over hundreds of millions of
dollars received in his personal bank account.
The charges bring the total number against Najib
to 32 as investigators ramp up a probe into how
billions went missing from scandal-plagued 1MDB- a state fund that he founded and chaired.
Najib has denied all charges, which have piled
up since he unexpectedly lost a general election
in May to Mahathir Mohamad, who reopened
the 1MDB investigation.
Prosecutors, describing the abuse of power
charges, said Najib used his position as prime
minister, finance minister and chairman of
1MDB to obtain funds totaling about M$2.3bn
(US$556.23m) between 2011 and 2014.
“The charges made today will give me a chance
to clear my name, that I am not a thief,” Najib
told reporters.
He was released after the judge set bail of
M$3.5m, to be paid by September 28.
Prosecutors said it was a matter of “national
disgrace” for a head of state to be facing such
charges.
“This is a case involving a man holding the
highest elected office and he, facing such
serious charges, must face some consequences
in the eyes of the court,” lead prosecutor Gopal
Sri Ram said.
Yes Bank
Shares plunge after RBI moveYES BANK’s shares tumbled nearly a third last
Friday, wiping as much as US$3.1bn off the
Indian private sector bank’s market value, after
the central bank reduced charismatic CEO Rana
Kapoor’s term.
The Reserve Bank of India said Kapoor could
serve as Yes Bank’s chief executive only until
January 31 next year. It did not give a reason.
Kapoor co-founded the bank and has been
instrumental in its rise to become India’s
fifth-largest private sector bank with assets of
US$43.19bn.
Yes Bank shareholders had voted in June to
extend Kapoor’s term as CEO and managing
director for three years, pending central bank
approval.
Yes Bank shares sank as much as 31.7% to
Rs287.30 on Friday, with more than 158m
shares changing hands – over seven times their
30-day average volume. They cut their losses to
be down 27% in the afternoon.
At least two brokerages downgraded the stock,
citing uncertainty and doubts in investors’ minds
about the bank’s future.
Nomura analysts said a need to raise growth
capital in troubled times, investor doubts about
asset quality and the RBI’s concerns for Kapoor
continuing in his position could weigh on the
stock.
Last October, Yes Bank saw its bad loans spike
after a risk-based supervision exercise by the
central bank forced it to account for Rs63.55bn
(US$881m) more in non-performing assets.Securities Commission Malaysia
Malaysia gives boost to retail bondsMalaysia has relaxed rules to give retail investors
greater access to its M$1.3trn (US$319.2bn)
conventional and Islamic bond market.