S. Korea Reaffirms Faith in U.S. Treasuries After S&P Downgrade

Sunday, 07 Aug 2011 07:44 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Aug. 7 (Bloomberg) -- South Korea said it reaffirms faith in U.S. Treasuries even after Standard & Poor’s last week cut the sovereign credit rating of the world’s biggest economy.

“Our faith in the U.S. Treasuries has not changed, although we cannot say whether to sell or buy them,” Vice Finance Minister Yim Jong Yong told reporters after an emergency meeting with officials from the central bank and financial regulators in Gwacheon, south of Seoul, today. “In principle, no other assets can replace the U.S. Treasury as safe asset.”

New York-based S&P Aug. 5 lowered the AAA credit rating for the U.S. by one level, to AA+, for failing to cut spending or raise revenue enough to reduce record budget deficits. Moody’s Investors Service and Fitch Ratings Aug. 2 affirmed their top credit rating for the U.S.

South Korea’s Kospi stock index fell 3.7 percent to 1,943.75 in Seoul trading Aug. 5, the biggest decline since Nov. 27, 2009, amid concern the U.S. economic recovery is petering out. The won had its biggest weekly drop against the dollar since February.

The U.S. Treasury Department said there is “no justifiable rationale” for the move, adding the rating company made a $2 trillion mistake in its calculations.

Russia said the one-step cut “can be ignored” and France joined the U.S. in questioning S&P’s reasoning. China’s official Xinhua news service said in a commentary that the U.S. must cure its “addiction” to borrowing.

Limited Impact

Yim said South Korean financial markets may have short- lived and limited impact from the U.S. rating downgrade because the nation has enhanced its capability to counter a crisis and that its well-diversified export market will help support the nation’s economic growth.

“There is no sign of foreign capital flight yet,” Yim said. Foreign investors bought a net 120 billion won ($113 million) worth of South Korean bonds on Aug. 4 and Aug. 5, he said.

The authorities will re-launch its 24-hour market monitoring system with a focus on capital flows and foreign- exchange rate and take prompt action whenever needed, he said.

The Bank of Korea’s board will meet on Aug. 11 to discuss whether to raise borrowing costs for the fourth time this year to tame inflation. Higher energy and food costs pushed South Korea’s inflation to a four-month high of 4.7 percent in July, breaching the central bank’s target every month this year.

S&P currently gives 18 sovereign entities its top ranking. The U.K., with a debt estimated at 80 percent of GDP this year, or 6 percentage points higher than the U.S., has the top credit grade. In contrast with the U.S., its net public debt is forecast to decline either before or by 2015, S&P has said.

New Zealand is the only country other than the U.S. that has an AA+ rating from S&P and an Aaa grade from Moody’s. Belgium has an equivalent AA+ grade from S&P, Moody’s and Fitch.

--Editors: Cherian Thomas, Michael Shanahan

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Poll: Likely Voters Favor a GOP-Led Congress

Monday, 20 Oct 2014 08:19 AM

People most likely to vote in the Nov. 4 midterm elections this year say they prefer Congress to be controlled by the Re . . .

New Tests Likely for Ebola Vaccine First Tried in '99

Monday, 20 Oct 2014 08:03 AM

A vaccine that appears to stop Ebola in monkeys was successfully tested in 1999, but only now are efforts under way to a . . .

Obama to Bypass Congress on Easing of Iran Sanctions

Monday, 20 Oct 2014 07:37 AM

President Obama is doing everything in his power to bypass Congress and suspend most of the sanctions placed on Iran ove . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved