Downgrade of share

[Torres]

How seriously should a person take the downgrade, especially when it is done by an American Investment company?

[Preston]

It depends on which side of the market you are on. If you are a potential buyer, then downgrade is especially bad and the share price must fall, fall, fall until it reach your entry point and which time the concept of fair value enters the equations. If you are a seller, then a downgrade from buy to neutral is not so bad considering the world and its pending problems and so it should considered as business as usual. But if you are MTN, then all this do , in the worst case scenario will be to make borrowing a bit more expensive, but then if you are Goldman Sach, they probably make millions by shortening the shares. There are plenty of vultures out there , have a look at this link esp MTNQ http://www.jse.co.za/DownloadFiles.aspx?RequestedNode=DownloadableDocuments/Safex/mtmdata/Daily Traded Options and Volatilities

[#3]

There is always more than one opinion on the market. So you should not take the downgrade seriously. They only ones who should, are the investors that use that company's ratings as an integral part of their selection strategy. You must remember, a downgrade needs to be viewed relative to all the other investments that the agency in question is considering. When SBK, for example, rates a company as a sell, it doesn't mean that the company is going to lose money. It means that SBK think that the market will outperform that stock. But SBK is thinking about a basket of stocks and believes that their are better stocks out there. Same with the Americans, but the Americans have a global platform to chose from. If your world is confined to the JSE top40, then you should not take the downgrade seriously at all. Now as for MTN, I think it is a bad investment, but that is just my own personal opinion, subject to a separate debate!

[Torres]

Thanks for the explanations. I believe that the downward movement over the pass few days has given investors a nice buying opportunity.

[sponono]

believe? http://www.citypress.co.za/Business/News/MTN-shares-slump-on-currency-political-risk-20120114