Martial law incident raises caution over Korean investments: S&P

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Martial law incident raises caution over Korean investments: S&P

Published: 04 Dec. 2024, 13:31 Updated: 04 Dec. 2024, 15:00

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

Presenters for a joint seminar on the global credit outlook co-hosted by NICE Investors Service and S&P Global Ratings during a press conference held ahead of the event in western Seoul on Wednesday [SHIN HA-NEE]

President Yoon Suk Yeol's overnight declaration and subsequent lifting of martial law is likely to heighten foreign investors' caution in Korea, credit experts of S&P Global Ratings said on Wednesday.

The country's sovereign rating, on the other hand, is expected to remain unaffected.

"Risk in Korea in that kind of matter really wasn't on companies' minds," said Andy Liu, S&P Global Ratings' managing director of corporate ratings in the Asia-Pacific region, during a news conference ahead of a joint credit outlook seminar co-hosted by S&P Global Ratings and NICE Investors Service in western Seoul.

"Given that it happened, it will probably cause some of the [corporations] to think about and re-evaluate supply chain risk, financial risk, policy risks," Liu suggested.

"Could that affect how the companies behave in terms of what they think the right balance sheet should be, what their capital expenditures should be, and where that could take place? I think it is definitely affirmative."

While also noting that the short-term impact on actual business operations and plans would be limited given the prompt resolution, Liu stressed that the next six to nine months would be crucial for Korea to regain confidence in its political and financial stability.

Ki Tae-hoon, director of NICE Investors Service's ratings policy division, said the latest incident "may have a short-term impact on the financial market and, in particular, on [Korea's] external credit and brand image," but expected the brief shock would eventually wear off.

"As fundamentals of the corporate or financial sector appear solid, I believe [the market] will gradually recover from the political instability," said Ki.

Korea's sovereign credit rating, on the other hand, will remain unaffected, according to S&P's Kim Eng Tan, senior director of sovereign and international public finance ratings.

"From our perspective, the high AA rating that we have on the Korean sovereignty, I think, to a large extent, reflects our expectations that things will be more or less strong within the Korean institutions as it is," said Tan.

Although the director noted that the incident would come as "a negative shock" that may impact the decisions of international investors, he said, "We don't see any need for us to change the rating."

BY SHIN HA-NEE [[email protected]]