Moody’s Says North Korea Test Won’t Affect South Korea’s Rating
Moody’s Investors Service said the first nuclear test in three years by North Korea yesterday won’t affect South Korea’s sovereign credit rating.
South Korea’s stocks and currency slid after the communist North said yesterday it conducted a nuclear test and also launched three short-range missiles. The Kospi share index tumbled as much as 6.3 percent, before paring its losses to close down 0.2 percent.
“We maintain the stable outlook on South Korea’s A2 rating,” Thomas J. Byrne, senior vice president of Moody’s, said in an e-mail in response to questions. “This incorporates a moderate degree of event risk from the low probability but high severity of military action or a leadership transition development that destabilizes the Korean peninsula.”
The United Nations Security Council held an emergency session and condemned the nuclear test. North Korea’s actions may intensify tension on the peninsula and is the latest blow to efforts to persuade Kim Jong Il’s regime to abandon nuclear weapons development in exchange for economic aid pay day loans.
In July 2007, Moody’s raised its rating on South Korea’s long-term foreign-currency debt to A2, the sixth-highest investment grade.
“To put this in context, in our rating methodology, most countries that have high investment grade ratings have low or very low event risk,” Moody’s Byrne said.
South Korean Vice Finance Minister Hur Kyung Wook said today that the impact from the nuclear test on financial markets and economy is “limited.”
Standard & Poor’s and Fitch Ratings both said yesterday the nuclear test by the North won’t affect South Korea’s rating.
Filed under: finance by Finance Boss