Shrunken Investment
The combined amount of reserve assets held by Korea’s top 10 conglomerates surged nearly 44 percent over the past three years.
According to market researcher CEO Score on November 20, the internal reserves of the country’s 82 listed firms under the top 10 chaebol, or conglomerates, reached 477 trillion won (US$452 billion) at the end of June this year, up 43.9 percent from 331 trillion won at the end of 2010.
Internal reserves refer to a company’s capital surplus excluding tax payments and dividends, which is reserved for future investments. A higher figure means a healthier financial status.
Market insiders said, however, that the rise also indicates that the affiliate firms of conglomerates have been reluctant to make new investments amid the prolonged global economic slump.
According to CEO Score, Samsung Group with its flagship company Samsung Electronics saw its internal reserve rise 50.1 percent to reach 162.1 trillion won (US$152.6 billion) at the end of June.
Hyundai Motor Group, the world’s fifth-largest carmaker, saw its internal reserve double over the cited period to 100.5 trillion won (US$94.62 billion).
Korea’s third-largest conglomerate, SK Group, held internal reserves worth 55.6 trillion won (US$52.35 billion).
By affiliate, Samsung Electronics topped the list with an internal reserve of 137.8 trillion won (US$129.7 billion), followed by Hyundai Motor with 45 trillion won (US$42 billion) and POSCO with 41.5 trillion won (US$39.1 billion).
In terms of the reserve-to-capital ratio that divides a firm’s internal reserves by paid-in capital, Lotte Group topped the list at 5,123%, down 346 percentage points during the cited period. The sharp fall resulted from its massive investment in building a mammoth skyscraper in southeastern Seoul.
POSCO Group ranked second with a ratio of 3,722%, followed by Samsung Group with 3,709% and Hyundai Heavy Industries Group with 3,340%.