S&P Forecasts Worsened Earnings for Korean Companies in H1 Due to COVID-19

On the 12th, when the KOSPI plunged intraday to the 1813 level, the KOSPI index was displayed on the electronic board in the dealing room of Hana Bank in Jung-gu, Seoul. The won-dollar exchange rate, which started at 1190.7 won, surpassed 1,200 won during the session. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Lim Cheol-young] The international credit rating agency Standard & Poor's (S&P) has forecast that the profits of Korean companies will deteriorate in the first half of this year due to the spread of the novel coronavirus infection (COVID-19). In particular, it diagnosed that companies in the aviation industry, including petroleum, chemical, steel, distribution, and automobile sectors, are exposed to significant risks.

On the 12th, S&P analyzed in a report that Korean companies are expected to be widely affected by COVID-19. S&P has assigned a negative rating outlook to 23% of Korean companies.

S&P analyzed that Hyundai Motor and Kia Motors, which faced production delays due to China’s temporary suspension of automobile parts wiring harness supply since January, will experience production shortfalls amounting to 120,000 units.

Additionally, it forecasted that overseas facilities of Samsung Electronics and LG Electronics could also face disruptions due to supply chain interruptions in Southeast Asia, including Vietnam. However, it predicted that the negative impact on credit ratings would not be significant since Samsung Electronics holds approximately 90 trillion won in cash as of the end of last year.

By industry, tourism, leisure, and aviation sectors are expected to be directly hit. As of the last week of last month, international passenger traffic decreased by about two-thirds compared to the same period last year, and the daily passenger transport volume at Incheon Airport dropped to about 10% of the usual level. S&P stated, "Korean companies rely heavily on exports, so a decrease in demand could have a greater impact on corporate creditworthiness." Furthermore, it forecasted that the chemical, steel, retail, automobile, and technology sectors would also be affected.

Nevertheless, S&P said that most Korean companies will have ample liquidity and sufficient opportunities to raise funds from banks, and in the case of export companies such as Samsung Electronics, operating performance could improve due to the depreciation of the Korean won.

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