Moody's: South Korea stable

Moody's Investors Service said it changed the outlook on South Korea's A3 long-term foreign currency ratings to stable from negative in light of diminished tensions in connection with North Korea's nuclear weapons program.

Moody's outlook change applies to the government's A3 ratings for foreign and domestic-currency denominated obligations as well as to the nation's A3 country ceilings for foreign currency bonds and bank deposits.

The rating agency said the outlook change was prompted by continuation of multilateral negotiations to resolve the threat to peace posed by North Korea's reactivated nuclear weapons program. Moody's believes that the risk of conflict on the Korean peninsula will remain low as long as the current negotiations hold promise for achieving the goal shared by the United States, the Republic of Korea, and Japan.

Their stated goal is a "complete, verifiable and irreversible" dismantling of the nuclear weapon systems under development by the Democratic Peoples' Republic of Korea (North Korea). China and Russia also advocate a Korean peninsula free of nuclear weapons, and a cohesive approach by these five nations seems essential for a final resolution of the nuclear crisis.

The rating agency noted, however, that North Korea has not yet taken the preliminary, but fundamental, steps of freezing its nuclear weapons programs and reassuming its obligations under the Nuclear Non-Proliferation Treaty, which it unilaterally abrogated in January 2003 (the only NPT signatory to do so).

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