Standard & Poor's to keep Taiwan's ratings the same

Despite the political chaos following the presidential election on Saturday, Standard & Poor's Ratings Service appears to have no plans to change its credit ratings on Taiwan.

While there is a lot of uncertainty over the outcome of the election, Chew Ping (周彬), S&P's associate director of Asia & Pacific Sovereign Ratings, said the agency would not change its view for the moment.

"The impact, if any, on Taiwan's ratings depends on how long the issue will last," Bloomberg quoted Chew as saying yesterday. "The dispute has to be resolved and it will be resolved eventually. It will not last for a year."

On Friday, a day before the election, S&P said the shooting of President Chen Shui-bian (陳水扁) had no immediate impact on the country's credit ratings.

The outlook remains ``stable'' on Taiwan's AA- long-term debt rating, the fourth-highest investment grade, and the highest A-1+ short-term rating on both foreign and local currency debts, S&P said in a statement at that time.

But Chew warned that Taiwan's ratings could come under pressure, as the agency stated Friday, "if the nation's economic prospects are weakened, and domestic and international confidence wanes dramatically with respect to a worsening cross-straits relationship, and public finance deteriorates further."

Investors don't like uncertainties and business leaders believe the election disputes, if they continue, may create instability in Taiwan.

"Economic endeavors are what Taiwan needs to do at the current stage ... rather than political instability, or the issue will pay off with greater social costs," the National Association of Small & Medium Enterprises (中小企業協會) said in a statement yesterday.

The association is headed by Day Sheng-tung (戴勝通), who is also chairman of San Sun Hat & Cap Co (三勝製帽). Day declined to comment on the election disputes.

The agency said Friday that its ratings on Taiwan remain underpinned by the country's exceptional external balance sheets, its ample international liquidity and its strong exports.

"Taiwan retains substantial liquidity and financial resources, and its government is well equipped to manage major shocks to the financial markets," S&P said at that time. "Nevertheless, adverse political developments, especially further deterioration in the cross-strait relationship with mainland China, might lead to a reassessment of economic prospects and fiscal outcomes."

Chew didn't expect the election disputes to cause significant financial market instability.

``There will not be a big effect on Taiwan's stock, currency and bond markets on Monday as investors are expected to take a wait-and-see attitude,'' he said.