South Korea’s financial markets are showing signs of recovery from a global crisis caused by a faltering U.S. economy and eurozone debt problems, but remains shy of pre-crisis levels seen in July last year, data showed Monday.
South Korea’s credit default swap premium, or the cost of insurance against sovereign default, fell to 1.41 percent on Friday from 2.29 percent on Oct. 4., according to the data by the Korea Center for International Finance.
However, the latest CDS premium is still higher than the 1.01 percent tallied on Aug. 1, 2011, when the global financial markets were rocked by a shocking U.S. rating downgrade.
In early August last year, Korea’s key stock index, the KOSPI, tumbled more than six percent in two consecutive sessions after global rating appraiser Standard & Poor’s slashed the “AAA+” credit rating of the United States by one notch to “AA+.”
The KOSPI rebounded to close just shy of the 2,000 mark last Friday, but is still lower than the 2,174.31 seen on July 27 last year.
Fear over volatility in local financial markets has waned to pre-crisis level as expectations on Greece’s austerity plan rose, and the ultra-low rate policy by the U.S. Federal Reserve also eased investor’s risk-averse sentiment, analysts said.
The CDS premium for local banks also declined sharply, with the comparable figure for the country’s five major lenders standing at 1.57 percent as of Feb. 10, compared with 2.81 percent tallied in early October last year.
The local currency also gained ground against the U.S. dollar rising to 1,123.80 won to the greenback on Friday from 1,195.80 five months earlier. The local currency changed hands at 1,061.70 won in Aug. 4 last year.
Meanwhile, the KOSPI 200 Volatility Index, a gauge of the local market’s volatility, fell to 21.56, nearing the pre-crisis level of 19.31 on Aug. 1, 2011.
