Fitch puts Korea on positive watch

Fitch Ratings said it placed the Republic of Korea's long-term foreign currency A and local currency AA- ratings on Rating Watch positive. The short-term rating is affirmed at F1 and the country ceiling at A+.

Fitch said Korea's ratings could be upgraded following a review of the agreement announced at the six-party talks on Monday in which North Korea committed to ending its nuclear weapons program and re-entering the Nuclear Non-Proliferation Treaty.

In exchange, North Korea will receive energy assistance and economic aid, and the other parties to the talks will normalize diplomatic relations with the regime.

"This is the first significant agreement to emerge from the six-party talks and it goes some way to addressing our concerns regarding the security threat posed by North Korea," says James McCormack, head of Asia sovereigns at Fitch. "It effectively precludes any immediate referral of the issue to the United Nations Security Council, which could have resulted in the imposition of economic sanctions and a further heightening of tensions."

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