20180112-穆迪服务-South_Korea_s_Sovereign_Credit_Risk_Calmer_Against_a_Friendlier_Backdrop_18页_506kb

Moody's Sector In-Depth: South Korea's Sovereign Credit Risk and Other Countries

Core Content

This document provides an analysis of sovereign credit risk and related market indicators for various countries, with a primary focus on South Korea. It discusses how the credit risk measures, such as the Expected Default Frequency (EDF) and Credit Default Swap (CDS) spreads, have evolved over a specific period. The analysis also includes comparisons with previous data and highlights the differences between market-implied ratings and Moody's official ratings.

Main Points

• South Korea's Sovereign Credit Risk:

  • South Korea's 5-Year EDF, a measure of sovereign credit risk, saw a smooth decline in early 2018, from 0.23% on January 1 to 0.17% on January 11, representing a 26% improvement in investor sentiment.
  • The 5-Year CDS spread, a major input to the EDF model, dropped from 57 bp on January 1 to 45 bp on January 11.
  • The EDF for South Korea reached a high of 0.30% in November 2017 and a low of 0.11% in January 2017.
  • The EDF-implied rating improved from Baa1 to A3 on January 5, 2018, while the Moody's Investors Service rating remained Aa2 throughout the year.
  • The EDF-implied rating responds more quickly to market sentiment than Moody's ratings, which are based on a more fundamental, long-term assessment.

• Market-Implied Ratings vs. Moody's Ratings:

  • Market-implied ratings reflect short-term market sentiment and are derived from CDS spreads.
  • Moody's ratings take a more fundamental, through-the-cycle view of credit risk and are based on slower-developing fundamentals.

• Other Countries:

  • The document includes a table of credit risk data for several countries, including Australia, China, Hong Kong, Indonesia, Japan, Malaysia, New Zealand, Philippines, India, Thailand, and others in the Europe region.
  • The data includes EDF (1-Year and 5-Year), CDS Implied-Rating, Bond Implied-Rating, and Senior Rating for each country, with changes over a 12-month period.
  • For example, in China, the 5-Year EDF dropped from 0.36% to 0.17%, and the CDS Implied-Rating improved from Baa3 to Baa1.
  • In Greece, the 1-Year EDF decreased from 1.47% to 0.21%, and the 5-Year EDF dropped from 4.05% to 1.57%, indicating a significant improvement in credit risk perception.
  • In the Europe region, countries like Italy and Portugal saw notable decreases in their EDF and increases in their implied ratings, showing improved market sentiment.

Key Information

• EDF and CDS Spreads:

  • EDF is a forward-looking probability of default derived from CDS spreads.
  • CDS spreads are adjusted for loss-given default and the market price of risk to estimate actual future default risk.

• Rating Changes:

  • The document outlines rating changes for different countries, including improvements and declines.
  • These ratings are based on a variety of factors, including political stability, economic conditions, and market sentiment.

• Moody's Analytics:

  • Moody's Analytics is responsible for markets and distributing all Moody's Capital Markets Research, Inc. materials.
  • It is legally and organizationally separate from Moody's Investors Service, which is the rating agency.

• Disclaimer:

  • Moody's Analytics does not provide investment advisory services or products.
  • The information provided is for research purposes only.

Summary Table

This summary highlights the key changes in sovereign credit risk measures and market-implied ratings for South Korea and other countries, illustrating the impact of political and economic developments on investor sentiment and credit risk assessments.