"Last month, Fitch emphasized the strength of Russia’s credit fundamentals, including the high level of FX reserves and the low level of public indebtedness," Regis Chatellier from Societe Generale told Barron's. "Nevertheless, Fitch remains concerned that renewed interventions to support the RUB … have been depleting FX reserves.”
The Financial Times notes that even if the agency downgrades the country's sovereign credit rating by two notches, the debt would still be considered investment grade, since the main risk of exclusion from the BarCap Index would lie in downgrades from the agencies S&P and Moody's. However, the paper cautioned that both agencies could lower their ratings on Russia to junk within the coming weeks.
Barron's states that while Russia is currently rated BBB- by S&P, the country was given a negative outlook two weeks ago, pointing to a likely downgrade from the agency in the near future, which it believes will be followed by a downgrade from Moody's. A fall from the investment grade category would have the greatest effect on Russian corporate borrowers, according to SocGen experts, for whom the cost of refinancing would be set to rise as investors tend to shy away from junk bonds. According to the FT, Russian corporate borrowers are due to repay almost $100 billion in 2015.
Other major emerging markets which are also facing possible downgrades this year include Brazil and Turkey, the FT reports, also highlighting the recent increase in downgrades in the countries of Eastern Europe, the Middle East and Africa. According to statistics from Bloomberg and Barclays Research, in 2014 the number of downgrades in this category were more than double the number of upgrades, while Asia and Latin America continued to observe a positive EM ratings trend.