It appears that Korean companies are rather pessimistic regarding their financial conditions for the third quarter of this year.
The Korea Chamber of Commerce & Industry (KCCI) recently conducted a Business Survey Index on Corporate Finance (FBSI) survey regarding their financial situation forecasts for Q3, and which was answered by 500 companies nationwide. The average result was 93, 7 points lower than the reference value and 2 points down from the previous quarter. Prospects have remained below 100 for nine consecutive quarters since Q3, 2011.
The FBSI, ranging from zero to 200, is a numerical expression of the flow of funds in industries. Higher than 100 signifies that more than 50% of respondents expect their financial situation to get better in the upcoming quarter. “The survey shows that the majority of companies in Korea are quite negative about their financial conditions amid the domestic recession, the United States’ exit strategy from quantitative easing and concerns over a slowdown in the Chinese economy,” said the KCCI.
Small and mid-size enterprises (92 points) were more pessimistic than big businesses. The figure fell by 2 points quarter-on-quarter. The figure for major corporations also fell below the reference value during the period.
By industry segment, only telecom (103) and automobile and auto parts (102) companies gave a positive response, with expectations that the semiconductor industry will rebound sooner or later and sales of automobiles will rise. Meanwhile, those in the machinery and metal manufacturing (95), textile and clothing (94), oil and chemical (92), steelmaking (89), construction (88) and shipbuilding and shipping (85) industries gave gloomy prospects. Respondents also answered that overall financing market conditions will remain at the 95 point level for this quarter. By financing means, banks recorded 98 points, followed by the non-banking sector (97), corporate bills (97), stocks (96) and corporate bonds (94).
“With uncertainties in the financial market on the rise, companies are having a hard time raising funds through the issuance of corporate bonds,” the KCCI stated, adding, “Vulnerable sectors, that is, shipping, shipbuilding and construction and SMEs, are likely to experience even bigger financial difficulties.”
“The quantitative easing policy of the US is coming to an end, increasing the possibility of foreign investors leaving the local stock and bond markets, ” said Jeon Su-bong, director of the First Research Division of the KCCI.