As South Africans settled in for the 21-day lockdown on Friday - and a period of much reduced economic activity - Moody's finally took the step it has been delaying for the past year or so and downgraded the country's debt to junk. The ratings agency is already a couple of steps behind peers Standard & Poor's and Fitch but the negative outlook it maintained means it may be about to play catch-up.

While some thought that Moody's could have continued its leniency - or at least stalled until after the Covid-19 pandemic has run its course - that doesn't alter the fact that the country's finances are quickly deteriorating and debt will continue to rise. It will be tough to gauge the real impact on the markets due to the ongoing coronavirus-induced volatility. Also, SA government bonds won't be excluded from indices that track investment-grade debt immediately but over the course of the next couple of months.

The news is bad for SA companies issuing bonds, particularly banks, as they are constrained by the sovereign rating.

Ingham Analytics has warned, in unambiguous analysis, to stay clear of banks for several months. Share prices had a weakening bias until February, and this has turned into a rout with the Covid-19 crisis. Friday was another shocker. They say there are three things to keep in mind at this point and unpack why. Is there enough capital adequacy to survive the fall-out of Covid-19? What about impairments? Is your dividend safe? Can day traders' profit? What if you already own shares? Click here to read "COVID-19 coup de grce for banks".

Also in your newsletter today, Anglo American has revised its guidance due to the impact the pandemic will have on its operations and South32 is cutting back on spending and suspending share buybacks as a precaution. Meanwhile, Exxaro says it will continue producing coal to help keep power stations running. Meanwhile, Vodacom and Mediclinic International have announced new chairs to lead their boards from July.

In The Week Ahead, Chris Gilmour looks back at some of the main news driving market activity last week and what lies ahead over the next five days, including results from Bell Equipment and Trencor. Also, watch out for car sales and manufacturing data for the month, which are likely to have been impacted by the coronavirus.

Have a good week and stay safe.

Stephen Gunnion

Managing Editor, InceConnect

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