Credit Rating Downgrade Won’t Make Australia Less Attractive to Investors: UBS

Tim Stewart, InvestorDaily

The seemingly inevitable downgrade of Australia’s sovereign credit rating from AAA to AA will not diminish the relative attractiveness of Australian markets to foreign investors, says UBS. In a note to investors, UBS head of investment strategy Tracey McNaughton dubbed S&P’s decision to lower Australia’s credit outlook from stable to ‘negative’ as the “downgrade Australia needs to have”. For one thing, it could shock federal politicians out of their “economic slumber”, Ms McNaughton said.

“Freed from the constraints of needing to maintain the coveted rating, a downgrade may allow Canberra to focus on longer term challenges such as much needed infrastructure investment,” she said. The pool of countries with AAA ratings from the three major credit ratings agencies is rapidly shrinking, making “AA the new AAA”, Ms McNaughton said. Most importantly, Australia remains an attractive place to invest – particularly for investors who are constrained from investing in negative yielding bonds, she said.

The rest of this article can be found at investordaily.com.au.