The debt ratio of South Korea’s companies listed on the main bourse KOSPI has increased by more than 4 percentage points on year in the first half of this year, indicating their weakened financial health. The companies' debts grew faster than their assets.
As of late June, the debt ratio of 636 KOSPI-listed companies whose fiscal year ends in December averaged at 108.75 percent, up 4.44 percentage points from the end of last year, according to data released by Korea Exchange (KRX) and the Korea Listed Companies Association on Aug. 26.
Debt ratio is defined as the ratio of total liabilities to total assets and is a measure of a company’s leverage or financial stability. The companies' debts jumped 7.27 percent to 1,354.08 trillion won (US$1.11 trillion) while their assets rose 2.90 percent to 1,245.08 trillion won (US$1.02 trillion) over the cited period.
The debt ratio had come down from 111.4 percent in the first quarter of last year to 106 percent at the end of December. However, the ratio went up to 110 percent in the first three months of this year, showing an upward trend for the first time in four quarters. The figure was slightly lower in the second quarter but it still showed a higher level than that in the first half of last year.
In particular, the debt ratio for the non-manufacturing sector added 12.1 percentage points to 152.6 percent over the past six months. The manufacturing sector saw its ratio rise 1.5 percentage points to 92.2 percent.
Companies with assets greater than debts numbered 344, or 54.1 percent of the total. Some 182 companies, or 28.6 percent, had a debt ratio of between 100 percent and 200 percent. The number of those with a ratio exceeding 200 percent rose by 22 to 110, accounting for 17.3 percent.