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Market Pulse

Market Pulse January 2020

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Sovereign credit ratings can give investors insight into the level of risk associated with investing in the debt of a particular country. It is a grading of a country's ability to meet its financial obligations. Obtaining a good sovereign credit rating is usually essential for developing countries that want access to funding in international bond markets. Key factors that come into play in deciding how risky it might be to invest in a particular country or region include its debt service ratio, growth in its domestic money supply, its import ratio, and the variance of its export revenue, among others. The rating may also include an evaluation of a country's political risk. An upgrade in a country’s sovereign rating usually indicates a stronger economy that can facilitate expanded investment and production. It can also inject positive growth to the country’s currency and equity market. Of course when a country is downgraded, the reverse may occur. The big three sovereign rating agencies in the world are Fitch, Moody's and Standard & Poors. In this cover story, we have discussed how S&P Global Ratings' global methodology applies to sovereign governments and monetary authorities and aims to give market participants a clear picture of how it rates both types of entities. Global rating agency Standard and Poor’s maintained its longheld BB- rating for Bangladesh on May 2019. Similarly, Moody’s Investor Service (Moody’s) maintained its long-standing credit rating of Ba3 for Bangladesh.