Portugal?s bond rating may be Downgraded one or two levels by Moody?s Investors Service due to budget cuts that will worsen the country?s ?lackluster? economic growth, according to a report by Bloomberg yesterday. Moody?s today put Portugal?s A1 long-term and Prime-1 short-term government bond ratings on watch.
Fiscal Trimmings
Portugal?s 2011 budget includes the strongest spending cuts in more than 30 years. The deficit that has contracted slightly to the amount of 9.3% of GDP in 2009 has been attributed to austerity measures taken recently. Portugal said it would trim the wage bill by 5% for public sector workers earning more than 1,500 euros (1,965 dollar value) a month, freezer hiring, and raise the value added tax by 2% to 23%, which will assist in providing further fiscal responsibility.
Portugal aims to cut its budget deficit to 7.3 percent of GDP this year and 4.6 percent in 2011, and to reach the EU limit of 3 percent in 2012.
Moody?s Analyst
?Portugal?s solvency is not in question,? Anthony Thomas, Moody?s London-based lead analyst for Portugal, said in a statement today. ?But the likely deterioration in debt affordability over the medium term and ongoing concerns about the economy?s ability to withstand fiscal consolidation and private-sector deleveraging mean its outlook may no longer be consistent with an A1 rating.?
Portuguese bonds changed deviated lightly, 10-year yields traded at 6.69% after the Moody?s warnings.
EFTs With Portuguese Exposure
iShares MSCI EMU Index Fund (NYSE: EZU) iShares MSCI EMU Index Fund seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the aggregate in the European Monetary Union (EMU) markets, as measured by the MSCI EMU Index. SPDR S&P International Energy Sector ETF (NYSE: IPW) SPDR S&P International Energy Sector ETF seeks to provide investment results that correspond generally to the total return performance of the S&P Developed Ex-U.S. BMI Energy Sector Index, an index that tracks the energy sector of developed global markets outside the United States. WisdomTree International Utilities Sector Fund (NYSE: DBU) WisdomTree International Utilities Sector Fund seeks investment results that closely correspond to the price and yield performance of the WisdomTree International Utilities Sector Index.
Equities Effected
Portuguese financial firms could remain sluggish as the economy remains contracted:
Banco Espirito Santa SA (ELI: BES) Banco Espirito Santo SA is a Portugal-based commercial bank. Together with its subsidiaries, the Bank provides a range of financial products and services, including credit and debit cards, loans, asset management, brokerage, investment and insurance. Banco Comercial Portugues SA (ELI: BCP) Banco Comercial Portugues SA is a Portugal-based bank engaged in banking activities and financial services, specially focused on Commercial Banking, Investment Banking, Retail Banking and Companies, Private Banking and Asset Management and Foreign Business. Banco BPI SA (ELI: BPI) Banco BPI SA is a Portugal-based commercial bank. It has individual, institutional and corporate customers. BPI operates a distribution network comprising 697 retail branches and 38 investment centers.
Portuguese large caps that should attain considerable attention:
Jeronimo Martins SGPS SA (ELI: JMT) Galp Energia SGPS SA (Galp) is a Portugal-based holding company engaged in various business areas: Exploration and Production, Refining and Marketing and also Gas and Power. Brisa Auto Estradas de Portugal SA (ELI: BRI) Brisa Auto Estradas de Portugal SA (Brisa) is a Portugal-based holding company engaged in the construction, maintenance and operation of highways. Portucel Empresa Prod de Pasta de Papel (ELI: PTI) Portucel ? Empresa Produtora de Pasta e Papel SA is a Portugal-based company engaged in the production and sale of cellulose pulp, paper and derivatives. Galp Energia SGPS SA (ELI: GALP) Galp Energia SGPS SA is a Portugal-based holding company engaged in various business areas: Exploration and Production, Refining and Marketing and also Gas and Power.
(To see an article by Roger Nachman about how to make money on Deere, click here.)
(To read a piece by Benzinga Staff on Bonds and the U.S. Census, click here.)
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