Moody's unlikely to change Korea's ratings

Tom Byrne Moody’s vice president

By Yi Whan-woo

Global credit ratings agency Moody’s Investors Service hinted Wednesday that it will not change South Korea’s current Aa3 sovereign rating because of North Korea’s nuclear test on Tuesday.

The U.S. credit rating agency said the test will not affect the firm’s outlook in the short term. South Korea’s rating is the fourth highest out of 21 government bonds the firm rates.

“We do not expect the test itself will have any material or lasting disturbance on the strong financial and economic fundamentals of South Korea,” Moody’s senior vice president Tom Byrne said in an email interview with The Korea Times.

“Korea’s rating remains Aa3 and the outlook stable,” he added, referring to the fact the company elevated the nation’s rating by one notch from A1 in August 2012.

The financial markets were relatively unaffected by the test. The benchmark Korea Composite Stock Price Index (KOSPI) closed at 1,976.07 Wednesday, up 30.28 points or 1.56 percent from the previous close that was driven by foreign-led program selling.

Byrne pointed out that the nuclear test implies that North Korea has barely transformed itself even after the leadership transition.

“North Korea's third nuclear test highlights unchanged geopolitical risks on the Korea peninsula following the leadership transition in Pyongyang,” Byrne said.

“The test also shows that constructive engagement with South Korea will likely prove as difficult now as in the past. Pyongyang remains intransigent and its rigid militaristic ideology rules out fundamental economic reform.”

The government confirmed that Pyongyang conducted a widely anticipated nuclear test in a step toward building a warhead that can be mounted on a missile. It was North Korea’s third nuclear test after it detonated devices in 2006 and 2009.