The U.S. credit rating downgrade by Moody’s Ratings on Friday is gaining attention in South Korea as it could lead to potential ripple effects on the local stock market.

Analysts agree that the downgrade of the U.S. credit rating is clearly a negative development but since it was widely expected and a short-term event, its impact on the Korean market is likely to be limited.

A credit downgrade alone is not expected to cause a shock as in the past, experts said.

On August 2, 2023, when Fitch downgraded the U.S. credit rating, the Kospi closed at 2,616.47, down 1.9 percent from the previous session.

On the same day, the Kosdaq index fell by 3.18 percent.

When S&P was the first among the three major global credit rating agencies to downgrade the U.S. credit rating on August 2, 2011, the Kospi lost 3.82 percent.

This time, however, the downgrade was largely anticipated and valuations are relatively low, which may limit its impact.

In 2011, when the European debt crisis was sweeping the global markets, S&P downgraded both the credit rating and the outlook for the U.S. despite an agreement on raising the debt ceiling.

“This time, Moody’s issued a preemptive downgrade after about a year and a half, and the uncertainty over tariffs has also eased,” said Han Ji-young, an analyst at Kiwoom Securities Co. “While the Kospi’s price-to-book ratio ranged from 1 to the mid-0.9s in 2011 and 2023, it has now fallen to 0.8, reducing valuation pressures.”

Analysts point out that more attention should be paid to China’s willingness to stimulate its economy and the uncertainty stemming from U.S. President Donald Trump.

“In the long term, actual economic fundamentals and each country’s policy direction have a greater impact on markets than credit rating adjustments,” said Seo Sang-young, an analyst at Mirae Asset Securities Co. “Concerns over continued U.S. fiscal deficits and rising interest costs have already been priced into the market as risks.”

[ⓒ 매일경제 & mk.co.kr, 무단 전재, 재배포 및 AI학습 이용 금지]