Markets see stability after rough 2011

Korea’s financial markets are showing signs of recovery from a global crisis caused by a faltering U.S. economy and euro zone debt problems, but remains shy of precrisis levels seen in July last year, data showed yesterday.

Korea’s credit default swap premium, or the additional cost of insurance against sovereign default, fell to 1.41 percent on Friday from 2.29 percent on Oct. 4, according to the data by the Korea Center for International Finance.

However, the latest CDS premium is still higher than the 1.01 percent tallied on Aug. 1, 2011, when the global financial markets were rocked by a shocking U.S. rating downgrade.

In early August last year the Kospi tumbled more than six percent in two consecutive sessions after global rating appraiser Standard & Poor’s slashed the AAA+ credit rating of the United States by one notch to AA+.

The Kospi rebounded to close just shy of the 2,000 mark last Friday, but is still lower than the 2,174.31 seen on July 27 last year.

Fear over volatility in local financial markets has waned to precrisis level as expectations on Greece’s austerity plan rose, and the ultra-low rate policy by the U.S. Federal Reserve also eased investor’s risk-averse sentiment, analysts said.

The CDS premium for local banks also declined sharply, with the comparable figure for the country’s five major lenders standing at 1.57 percent as of Feb. 10, compared with 2.81 percent tallied in early October last year.

The local currency also gained ground against the U.S. dollar, rising to 1,123.80 won to the greenback on Friday from 1,195.80 five months earlier. Yonhap