Standard & Poor's has no immediate plan to change South Korea's A rating or its stable outlook on the debt of Asia's fourth-largest economy. Kim Eng Tan, a credit analyst at the firm, told Reuters in an interview on Thursday South Korean banks' heavy reliance on wholesale funding, such as borrowing from the markets to fund lending, put them at risk to turmoil from financial markets.
The country is pulling out of the downturn ahead of many others but the Bank of Korea is unlikely to raise interest rates earlier than its peers, Tan said. S&P rival Fitch Ratings on Wednesday upgraded its rating outlook to stable, citing regained financial and economic stability. The move reversed Fitch's outlook cut to negative in November. S&P, which rates South Korea lower than China and Taiwan, did not change its outlook at the time.
"I think from third and fourth quarter, the quarter-on-quarter rebound will be less strong than we have seen in the second quarter. And our prediction remains that there will be a small contraction (for the whole of the year)," Tan said in a telephone interview.