South Korea yesterday held an emergency meeting of senior finance ministry officials to discuss possible fallout from the Standard & Poor’s (S&P) downgrade of US debt, but warned against overreaction.
South Korean Vice Finance Minister Yim Jong-yong met with top officials from the ministry, which afterward said in a statement: “There is possibility that South Korea’s economy might be affected in the short term.”
“However, there is no need to be concerned excessively about our economy and financial markets,” it added.
Yim also called for talks today with policymakers from the Bank of Korea and financial watchdogs to discuss what actions Seoul should take.
However, the ministry also said that South Korea is financially sound, has ample foreign exchange reserves and its overseas markets for exports have been widely diversified.
“This is not good news,” Yoon Jong-won, head of the ministry’s economic policy bureau, was quoted as saying by Yonhap news agency.
However, he stressed the need to weigh the latest bad news against positives such as better-than-expected data on the creation of new US jobs.
“Judging by conflicting economic signals, it is too early to say how things will turn out,” he said.
Standard & Poor’s cut the US credit rating for the first time in history on Friday, saying the country’s politicians are increasingly unable to come to grips with its massive fiscal deficit and debt load.
S&P downgraded the rating one notch from the top-flight “AAA” to “AA+,” and kept the outlook at negative, saying there was a chance it could be cut again within two years.
Meanwhile, a senior Bank of Korea official said yesterday that he saw no major short-term impact from the US credit rating cut.
“Markets have already had a few scenarios on the US ratings and this was one of them, I think,” Hong Taeg-ki, head of the South Korean central bank’s foreign exchange reserve management group, told reporters.
“An ‘AA’ rating has no difference from ‘AAA’ when it comes to the risk weighting of assets held by investors according to the Basel III guidelines and therefore there will be no big direct impact in the short run. And there is no alternative [to shift to],” Hong said.
South Korea has the world’s seventh-largest foreign reserves and is a major investor in US Treasuries.
A South Korean finance ministry official in charge of foreign exchange markets declined to comment on the rating change.
Hong said South Korea was not obliged to invest all of its more than US$300 billion worth of foreign reserves in “AAA” rated assets, although he declined to provide the minimum required credit rating.
He has previously also declined to say whether the central bank had started to cut back on its purchases of US Treasuries.
Almost 64 percent of South Korea’s foreign reserves were in US-dollar-denominated assets as of the end of last year. There was no specific figure for US treasury bond holdings.
Three experts in the high technology industry have said that US President Donald Trump’s pledge to impose higher tariffs on Taiwanese semiconductors is part of an effort to force Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to the negotiating table. In a speech to Republicans on Jan. 27, Trump said he intends to impose tariffs on Taiwan to bring chip production to the US. “The incentive is going to be they’re not going to want to pay a 25, 50 or even a 100 percent tax,” he said. Darson Chiu (邱達生), an economics professor at Taichung-based Tunghai University and director-general of
‘LEGACY CHIPS’: Chinese companies have dramatically increased mature chip production capacity, but the West’s drive for secure supply chains offers a lifeline for Taiwan When Powerchip Technology Corp (力晶科技) entered a deal with the eastern Chinese city of Hefei in 2015 to set up a new chip foundry, it hoped the move would help provide better access to the promising Chinese market. However, nine years later, that Chinese foundry, Nexchip Semiconductor Corp (合晶集成), has become one of its biggest rivals in the legacy chip space, leveraging steep discounts after Beijing’s localization call forced Powerchip to give up the once-lucrative business making integrated circuits for Chinese flat panels. Nexchip is among Chinese foundries quickly winning market share in the crucial US$56.3 billion industry of so-called legacy
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday held its first board of directors meeting in the US, at which it did not unveil any new US investments despite mounting tariff threats from US President Donald Trump. Trump has threatened to impose 100 percent tariffs on Taiwan-made chips, prompting market speculation that TSMC might consider boosting its chip capacity in the US or ramping up production of advanced chips such as those using a 2-nanometer technology process at its Arizona fabs ahead of schedule. Speculation also swirled that the chipmaker might consider building its own advanced packaging capacity in the US as part
A move by US President Donald Trump to slap a 25 percent tariff on all steel imports is expected to place Taiwan-made steel, which already has a 25 percent tariff, on an equal footing, the Taiwan Steel & Iron Industries Association said yesterday. Speaking with CNA, association chairman Hwang Chien-chih (黃建智) said such an equal footing is expected to boost Taiwan’s competitive edge against other countries in the US market, describing the tariffs as "positive" for Taiwanese steel exporters. On Monday, Trump signed two executive orders imposing the new metal tariffs on imported steel and aluminum with no exceptions and exemptions, effective