South Korea Will Issue Forex Bonds Amid Solid Rating Outlooks

South Korea’s Ministry of Economy and Finance announced that it intends to issue US$1.5 billion or 1.7 trillion won worth of forex bonds in Europe and the United States. This plan is on the back of foreign investors’ recent high evaluation of the East Asian nation’s economy.

We think this foreign exchange news is important for our readers to learn of because it shows a country’s condition, South Korea in particular, amid the COVID-19 pandemic. We understand that the South Korean economy’s sound status can positively affect its forex sector.

South Korea has exhibited that it is relatively insulated from international sovereign credit downgrades. The outlook from three international rating firms and the country’s stable sovereign credit ratings are pieces of evidence of this current fact.

According to the report posted online by South Korean news source The Korea Times, the East Asian country reportedly intends to issue forex bonds, formally known as foreign exchange stabilization bonds, to draw more foreign investments. Plus, it will conduct this latest effort by issuing the financial instruments denominated in euro and the US dollar at lower-than-expected yields.

The latter feature means that the forex bonds would translate to diminished foreign borrowing costs for local private and state-run companies. The three rating agencies that assessed the South Korean economy recently are Fitch Ratings, Standard and Poor’s or S&P, and Moody’s.

They left the country’s all-time-high credit rating and outlook the same this 2021. This appraisal is reportedly a notable achievement for South Korea, considering the COVID-19 pandemic-triggered economic recession led to downgrades of plenty of the East Asian country’s 113 peers over last year.

Fitch Ratings, Moody’s, and S&P viewed that South Korea’s external finances are robust. The proofs are the country’s high volume of foreign currency reserves, net external creditor position, and current account surplus sustained from 1998.

Several other significant financial market indices also reflected foreign investor confidence in South Korea’s credit status and overall economy. Over the past year, strong exports and continued coronavirus or COVID-19 pandemic containment measures in the country have resulted in limited economic contraction.

We think South Korea’s foreign exchange or forex sector will get sustained positively, considering the recent high evaluation results it obtained from Fitch Ratings, Moody’s, and S&P. The ratings are the latest overall indicator of the country’s vigorous economy.

We are pleased that South Korea was able to weather and manage the risks posed by the COVID-19 Delta variant and the other coronavirus variations’ spread. We hope that, in due course, its fellow G7 countries can also keep their foreign exchange industry thriving, despite the current ongoing global healthcare crisis.

These industrialized nations, excluding Germany, are the United Kingdom, the United States, Canada, France, Italy, and Japan, which witnessed their sovereign credit rating or credit outlook get downgraded mostly because of the devastating COVID-19 pandemic.

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