By WSJ Staff
SEOUL—Credit-ratings firm Moody’s Investors Service is likely to maintain its A1 sovereign rating for South Korea, a senior executive said Wednesday, a day after North Korea shelled its southern neighbor.
“The most recent provocative actions by North Korea underscore what we perceive as the heightened uncertainty from North Korea as it undergoes a transition in leadership,” Moody’s Senior Vice President for Sovereign Risk Unit Tom Byrne said in an email to Dow Jones Newswires. “We consider that the materialization of geopolitical event risk, a low probability but high severity event, is contained by the strategic interests of the U.S. and China and as such, geopolitical risks as currently assessed will not adversely affect South Korea’s rating.”
South Korean markets generally opened weaker Wednesday amid the renewed tensions on the Korean peninsula, but stocks and the won then pared early losses and bond futures gained ground as foreign investors snapped up bargains on belief that geopolitical risks will fade.
Moody’s has a A1 sovereign rating for South Korea with a stable outlook.
“Our assessment remains that the robust state of the ROK-US military alliance and China’s interest in stability on the peninsula will deter Pyongyang from taking even more reckless provocations, possibly leading to war,” Byrne said. “We believe that South Korea’s strong credit fundamentals continue to support the government’s A1 rating and that the outlook remains stable.”
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