Hanshin Rating "No Industry Outlook Favorable This Year"

[Asia Economy Reporter Park Jihwan] This year, the business environment in most domestic industries has not been favorable due to slowing growth rates and declining productivity. Korea Credit Rating (KCR) evaluated the outlook for most industries this year as 'neutral' or 'unfavorable.' Notably, no industry was found to have a favorable outlook.

KCR held a media briefing on the 30th at its headquarters in the 63 Building, Yeouido, under the theme '2020 Industry Outlook Review.' On this day, KCR announced that after analyzing the business conditions of 21 industries, none were rated as having a 'favorable' outlook this year, while 10 were classified as 'unfavorable.'

The remaining 11 industries were all 'neutral.' KCR rated the outlook for petrochemicals, construction, steel, automobiles and parts, air transportation, distribution, display, capital, non-life insurance, and life insurance as 'unfavorable.' In particular, distribution, display, non-life insurance, and life insurance industries have not only unfavorable industry outlooks but also 'negative' credit rating outlooks this year.

Although the securities industry outlook was 'neutral,' for large securities firms, the credit rating outlook was assessed as 'negative' considering the rapid weakening of capital adequacy indicators such as the Net Capital Ratio (NCR) due to high-risk investment expansion amid competitive growth. Besides this, the credit rating outlook for 16 industries, including small and medium-sized securities firms, was classified as 'stable,' and the credit rating outlook for the air transportation industry was classified as 'volatile.'

KCR pointed out regarding the securities industry, which is experiencing a large-scale fund redemption crisis at Lime Asset Management, "There is a possibility that risks such as the suspension of fund redemptions by Lime Asset Management and allegations of poor investments in trade finance funds could spread to financial companies with close business relationships," and "If there were any incomplete sales during the sales process, there is a possibility of compensation claims and regulatory sanctions." Furthermore, "losses in securities firms' equity and litigation risks may undermine business stability, so we will monitor the situation and reflect it in credit evaluations," it added.

Regarding the air transportation industry, it explained, "Passenger demand is expected to decline due to the coronavirus," and "We will monitor the timing of passenger demand normalization and each airline's response."

KCR commented on the distribution industry, "28.1% of the total market size is transacted non-face-to-face, and online market penetration is rapidly increasing," adding, "With the increase in single- and two-person households and simplified payment methods, new online platforms are expanding on the supply side as well. Existing large distribution companies are expected to face downward pressure on profitability due to deteriorating profitability and increased fixed costs such as labor and taxes," it said.

This content was produced with the assistance of AI translation services.