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South Africa would see bond outflows if Moody's cuts to junk - Credit Suisse

|About: iShares MSCI South Africa ETF (EZA)|By:, SA News Editor

South Africa may see bond outflows of $4B-$8B if its rating is cut to junk by Moody's, thereby excluding it from Citigroup's World Government Bond Index, write Credit Suisse strategists including Kasper Bartholdy and Daniel Chodos.

The outflows wouldn't occur all at once as there would be a gap between a Moody's downgrade and South Africa's removal from the WGBI.

"If we assume $1B-$2B of unhedged outflows from bonds on the day (about a quarter of our total outflows estimation) that could translate into an initial spike of 2%-4% in USD-ZAR," they write.

ETFs: EZA, FLZA

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