S&P "The abnormal situation has no real impact on Korea's credit rating"

Korea Economic Daily

Summary

S&P stated that the abnormal situation does not have a real impact on Korea's credit rating.
This suggests that the credit reliability for Korea is maintained in the global market.
However, if political turmoil escalates, foreign investors may withdraw Korean investments.

Global credit rating agency S&P maintains Korea's credit rating

However, "minor shock" from investors' perspective

Global credit rating agency Standard & Poor's (S&P) evaluated on the 4th that the abnormal situation in Korea would not have a real impact on the country's credit rating. They concluded that the political turmoil is not significant enough to shake Korea's economic and financial systems.

Tim Mack, head of S&P's Asia-Pacific sovereign ratings team, stated in a joint media briefing with Nice Credit Ratings on this day, "The abnormal situation was resolved in a few hours, and it is judged that Korea's institutional foundation is solid," he explained. Currently, S&P's sovereign credit rating for Korea (long-term basis) is 'AA'. AA is the third highest among the 21 ratings classified by S&P.

He said, "There is no practical reason to change Korea's current credit rating determination method or to change the rating," he said. However, he pointed out that "unexpected events can be a clear minor shock from the perspective of international investors," and "if another country is an attractive investment destination without political risk, investors may withdraw from Korea and turn to other places."

In 2016, during the Park Geun-hye administration's impeachment, Korea's sovereign credit rating was maintained. On December 9 of the same year, after the National Assembly's impeachment resolution, Fitch also announced that Korea's sovereign credit rating would be maintained at 'AA-'. S&P also said, "The impeachment resolution has a limited impact on Korea's sovereign credit rating." After the confirmation of President Park's impeachment by the Constitutional Court on March 10, 2017, Moody's rated that "the impeachment trial result is positive for Korea's sovereign credit rating."

Lee Hyuk-jun, head of Nice Credit Ratings, said, "Even during the market turmoil during the Park Geun-hye administration's impeachment and the presidential election in 2016-2017, the market returned to normal depending on the interest rate and liquidity," he said, "Investors judge according to fundamentals."

Heo Se-min, reporter semin@hankyung.com