REFILE-EMERGING MARKETS-South Africa bank shares slump on downgrade, Russia pauses
By Chris Vellacott
LONDON Aug 20 (Reuters) - South African bank shares fell 2 percent on Wednesday after a credit ratings downgrade, while Moscow stocks took a breather after an eight-day rally fuelled by hopes that tensions over Ukraine would defuse.
MSCI's broader emerging equity index traded just off three-year highs, hit on Tuesday when the market tracked Wall Street higher.
South Africa's banking index fell heavily, however, reacting to Moody's decision to downgrade four lenders citing a lower likelihood of support from the central bank to protect creditors after a debt crisis at African Bank.
Moody's cut by a notch the long-term local currency deposit ratings for Standard Bank of South Africa, FirstRand , Nedbank and Absa Bank, the local operation for Barclays Group Africa.
The ratings agency said it was adjusting its view following the $1.6 billion bailout of African Bank by the South African Reserve Bank.
"Maybe this (ratings move) is a little bit premature, they probably could have waited another six or so months to see what happened," Richard Segal, emerging markets strategist at Jefferies in London said.
"If you look at most of the other key banks, they are much more bullet proof. They have far more diversified businesses, they are funded mostly by deposits rather than wholesale funding, they have international business and I sincerely doubt that the Reserve bank would recommend a bail-in (for these banks)" Continuación...