"The revision to Korea's Outlook reflects concerns that the de-leveraging of the banking system may contribute to an erosion of the sovereign's external credit strengths, especially if it were accompanied by central bank interventions in the currency market to support the exchange rate," said James McCormack, head of Asia sovereigns at Fitch.
Fitch notes hat the authorities had responded quickly and in a focused manner to the funding distress of the banking system, with a comprehensive package of measures, including a USD30bn foreign-currency swap facility and a USD100bn guarantee programme for new bank debt. Though potential external financing needs are large - a forecast current account deficit (plus outflows of net FDI) for next year of USD35bn plus short-term and liquid foreign liabilities estimated at USD176bn - external financing and liquidity concerns remain moderate given still sizeable Bank of Korea (BoK) foreign exchange reserves of USD212bn at end-October 2008. The BoK also has access to a USD30bn currency swap arrangement with the US Federal Reserve and other swap arrangements that are currently being discussed with the People's Bank of China and the Bank of Japan. Even so, the fiscal and foreign exchange cost of funding the 'de-leveraging' of the banking system against the backdrop of a sharp slowdown in the economy and deterioration in bank asset quality could erode Korea's external credit strengths, especially if the BoK engages in less targeted foreign exchange intervention.
In revising the Outlook on Malaysia to Stable, Fitch took into account the likely impact on the balance of payments of lower oil and other commodity prices, as well as the deterioration in external demand conditions for electronics exports. Malaysia is one of Asia's more open economies and the region's only significant net oil exporter.
To accompany today's global review, the Sovereign group will host a teleconference at 15:00 GMT/ 10:00 EST to discuss the review in further detail. A full list of rating actions and associated rationales are detailed in a special report, 'Rating Review of Emerging Markets', now available at www.fitchratings.com
Teleconference details:
Date: Monday 10 November
Time: 15:00 GMT; 10:00 EST
Dial in numbers:
UK Toll: +44 (0) 1452 565 508
US Toll Free: +1 866 966 9449
Conference ID: 72232573
Replay (available until midnight on13 November):
UK Toll: +44 (0) 1452 55 00 00
US Toll Free: + 1 866 247 4222
Replay pass code: 72232573#
South Korea:
Long-term foreign currency IDR: affirmed at 'A+'; Outlook revised to Negative from Stable
Long-term local currency IDR: affirmed at 'AA'; Outlook revised to Negative from Stable
Short-term foreign currency IDR: affirmed at 'F1'
Country Ceiling: affirmed at 'AA'
Malaysia:
Long-term foreign currency IDR: affirmed at 'A-' (A minus); Outlook revised to Stable from Positive
Long-term local currency IDR: affirmed at 'A+'; Outlook revised to Stable from Positive
Short-term foreign currency IDR: affirmed at 'F2'
Country Ceiling: affirmed at 'A'
China:
Long-term foreign currency IDR: affirmed at 'A+'; Outlook Stable
Long-term local currency IDR: affirmed at 'AA-' (AA minus); Outlook Stable
Short-term foreign currency IDR: affirmed at 'F1'
Country Ceiling: affirmed at 'A+'
Taiwan:
Long-term foreign currency IDR: affirmed at 'A+'; Outlook Stable
Long-term local currency IDR: affirmed at 'AA'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F1'
Country Ceiling: affirmed at 'AA'
Thailand:
Long-term foreign currency IDR: affirmed at 'BBB+'; Outlook Stable
Long-term local currency IDR: affirmed at 'A'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'F2'
Country Ceiling: affirmed at 'A-' (A minus)
India:
Long-term foreign currency IDR: affirmed at 'BBB-' (BBB minus); Outlook affirmed at Stable
Long-term local currency IDR: affirmed at 'BBB-' (BBB minus); Outlook Negative
Short-term foreign currency IDR: affirmed at 'F3'
Country Ceiling: affirmed at 'BBB-' (BBB minus)
Contacts: James McCormack, Hong Kong, +852 2263 9925/[email protected].
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.