Bangkok--3 Jun--Standard & Poor's
Standard & Poor's Ratings Services said today that it expects that the geopolitical tensions on the Korean peninsula will remain within the bounds of what we took into account when we assigned our 'A/A-1' foreign-currency and 'A+/A-1' local-currency sovereign credit ratings to the Republic of Korea.
Over the years, there have been a number of military skirmishes between the Republic of Korea and The Democratic People's Republic of Korea (DPRK). Last March, tensions between the two countries escalated after the Republic of Korea's Cheonan corvette sank in the Yellow Sea, allegedly after a DPRK submarine torpedoed it.
The ratings on the Republic of Korea incorporate our view of two primary risks: one, that a full-scale military conflict could break out between the Republic of Korea and the DPRK, and two, that the DPRK's economy could collapse and reunification could ensue. Notwithstanding the political succession issues that we believe are currently being played out in the DPRK, Standard & Poor's still sees these two risks as low probability. If our assessment of that probability were to increase materially, however, we would likely revise our ratings on the Republic of Korea.
RELATED RESEARCH
Sovereign Credit Ratings: A Primer, May 29, 2008.
Foreign And Local Long-Term Sovereign Ratings On Republic of Korea Affirmed At 'A/A+'; Outlook Stable, Jan. 12, 2010.
Republic of Korea, Dec. 14, 2009.
What 11 East Asia-Pacific Countries Have to Teach the Rest of the World, May 27, 2010.
The G-20: Will There Be A Changing Of The Guard?, April 20, 2010.
Missile Threats Tighten Geopolitical Risks For Korea, Sept. 15, 2006.
Considerations For Foreign Direct Investment In North Korea, July 28, 2005.
A Korean-language version of this article is available via www.standardandpoors.co.kr or via Standard & Poor's CreditWire Korea on Bloomberg Professional at SPCK.
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