Invest KOREA

According to Yonhap News,

(SEOUL = Yonhap News) South Korea's credit default risks decreased in November from a year earlier, data showed Wednesday, as the country's improved fundamentals overwhelmed woes over an anticipated cut in U.S. quantitative easing.

According to market researcher SuperDerivatives, the credit default swap (CDS) premium for South Korean state bonds reached 59.97 basis points Monday, marking the lowest rate since 56.55 basis points tallied in November 2011.

The spread on CDS reflects the cost of hedging credit risks on corporate or sovereign debt. A rise implies a deterioration in the credit of government bonds and higher costs for issuance. A basis point is 0.01 percentage point.

It also marked a sharp decline from a yearly high of 121.16 basis points tallied on June 24, when a possible tapering of the U.S. Federal Reserve's economic stimulus measures dealt a harsh blow to the economic outlook here.

South Korea's risk premium had been growing steadily in the first half of 2013 also as North Korea issued near daily threats in response to military drills conducted with the U.S., sparking geopolitical uncertainties.

Market watchers said the latest decline came as South Korea boasted robust economic data, lending support to the brighter outlook on its credibility.

South Korea logged a current account surplus for the 20th straight month in September to reach US$6.57 billion, reflecting its healthy economic conditions. The current account is the broadest measure of cross-border trade.

Asia's fourth-largest economy also grew at the fastest pace in more than two years in the third quarter on improving domestic demand and a pickup in facility investment, the central bank said last month.

South Korea's gross domestic product, the broadest measure of economic performance, grew 1.1 percent in the July-September period from three months earlier, the bank's data showed.

colin@yna.co.kr

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