Banking & Finance

Korean Credit Ratings Safe After Kim Jong-Il Death (EWY, SKOR, KF, KEF, PKX, KEP, SKM)

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.

Read Also: The 8 Nations Likely To See Credit Rating Upgrades

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

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