Moody`s: S.Korea`s credit rating outlook remains stable

The global ratings agency Moody`s said Friday that the outlook for South Korea`s credit rating remains stable at "A1" despite the death of North Korean leader Kim Jong Il.

In its annual report on South Korea released the same day, Moody`s cited the country`s strong economic fundamentals and financial stability in maintaining its credit rating. Moody`s rating is the same as that of S&P, which retained South Korea`s status Dec. 14 before Kim died.

In the report, Moody`s said Kim`s death raised further uncertainty over the North`s dynastic power transition and the stability of its government but the robust alliance between South Korea and the U.S. will provide a strong deterrence to war.

The rating agency called South Korea`s economic power "very high" and the soundness of its institutions and finance "high." Compared with 20 major economies, the county has a significantly low jobless rate despite inflation being a little high, but expectations over inflation have eased, it added.

Korean stocks will be more affected by eurozone economies whose credit ratings are likely to be downgraded than Kim`s death, according to experts. Moody`s also said the outlook for South Korean exports is not bright due to slow recovery of the U.S. economy and the financial and fiscal crises in the eurozone.

Korean stocks slightly gained Friday as weekly applications for unemployment benefits in the U.S. hit a record low the previous day. Given the impending downgrade of eurozone countries, however, experts in Seoul advised investors to take caution in making investment decisions.

Lee Sang-jae, an analyst at Hyundai Securities, said, "With Germany continuing to sit on its hands, France`s credit rating will be inevitably downgraded," adding, "More attention is being drawn to the intensity of shocks than to the downgrade itself, so attraction to risky assets is fading."

Park Jung-jae, an analyst at Korea Investment & Securities, also said, "S&P will decide the credit ratings of eurozone countries with a few days," adding, "Downgrades will inevitably bring about shocks, so investors are advised to make their investment decisions after credit ratings are announced."

january@donga.com teller@donga.com