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Ratings, adversity and EM policy responses

Weekly investor research

26 February 2018

Russia is investment grade again. The roundtrip in Russian sovereign ratings is testimony to the fact that ratings agencies pay more attention to the sources of adversity rather than the policy response to adversity when it comes to Emerging Markets (EM) countries. This is bad practice, because it makes ratings agencies little better than momentum jockeys with official regulatory recognition. It is time that ratings agencies start to use their privileged access to EM policy-makers to make judgements about the likely quality of policy responses rather than merely seeking to be on the right side of the momentum all the time.

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