If there was one issue which may have created uncertainty around the credit ratings of South Korea, it was the death of dictator Kim Jong-Il in North Korea. We just recently featured South Korea as a nation which could actually face a ratings upgrade, and the good news is that this has not changed.
While already investment grade, both S&P and Moody’s have chimed in saying that Jong-Il’s death changes nothing to the nation. It was Fitch which could still upgrade South Korea because its “A+” rating now has a “Positive” outlook. Fitch also joined S&P and Moody’s to note that the death poses no downgrade or outlook change.
This is likely all welcomed news for holders of the iShares MSCI South Korea Index (NYSE: EWY) and IQ South Korea Small Cap ETF (NYSE: SKOR) in ETFs and then also for the closed-end fund holders of The Korea Fund Inc. (NYSE: KF) and the Korea Equity Fund Inc. (NYSE: KEF).
It is unlikely that the businesses were truly that worries in South Korea, but the active ADR shares are POSCO (NYSE: PKX) as the Korean steel giant, Korea Electric Power Corp. (NYSE: KEP) as the utility, and SK Telecom Co. Ltd. (NYSE: SKM) in telecom.
When we looked at the research for the nations which could see credit rating upgrades the 2010 purchasing power parity GDP was $1.46 trillion. The big issue for investors to consider is that Fitch is only one of three ratings agencies with a “Positive” outlook. On the other hand, bargain hunters will notice that South Korean equity prices fell nearly 30% from the yearly highs in 2011.
JON C. OGG