Korean firms’ sentiment to remain low

By Korea Herald
  • Published : Jan 27, 2014 - 20:54
  • Updated : Jan 27, 2014 - 20:54
South Korea’s major companies forecast their business conditions to remain gloomy in February due to a drop in profitability and persistent economic uncertainties, a poll showed Monday.

The business survey index came to 88.7 for next month, down from 93.4 for January, according to the poll of the top 600 companies by sales conducted by the Federation of Korean Industries.

A BSI reading below the benchmark 100 means pessimists outnumber optimists.

The index has been below 100 for the fourth straight month since November. It has also fallen below the 90 level for the first time since February of last year when it reached 86.7.

Unfavorable economic conditions and woes over the U.S. plan to scale back its bond-purchasing program might render the companies jittery over their business conditions for next month, the FKI said.

Local big companies such as Samsung Electronics Co. and Hyundai Motor Co. reported weak operating profits last year and expected more challenges ahead.

The U.S. Federal Open Market Committee that meets this week is widely expected to reduce bond purchases by $10 billion next month.

The Federal Reserve currently buys $85 billion worth of bonds every month in a stimulus program aimed at invigorating the world’s largest economy.

“The latest findings reflect adverse business sentiment among local companies despite improved macroeconomic indicators for the South Korean economy as a whole,” said Kim Yong-ok, head of FKI’s economic policy team.

After posting a 2.8 percent growth in 2013, Asia’s fourth-largest economy is expected to grow 3.8 percent in the new year, according to the central bank.

The expert said it is imperative that the country take steps to do away with unnecessary regulations so companies can make more investments.

The latest poll also showed the BSI reading for domestic consumption standing at 91.5, with exports and investment reaching 95.1 and 92.1, respectively. Cash liquidity and employment numbers stood at 92.3 and 97.4, with inventory conditions standing at 104.2.

The actual BSI number for January stood at 89.4, below the 93.4 forecast for the month in late December, with individual sector numbers in domestic consumption, exports, investment all standing in the low 90s, a reflection of current unfavorable times, the FKI claimed. (Yonhap)