Ratings agency expects chip, construction, savings bank sectors to suffer


Korea’s construction and semiconductor industries could be severely damaged by fiscal woes in Europe and the United States, a local credit rating company predicted.

Industries vulnerable to external shocks picked by NICE Investors Service Co. also included shipbuilding, display, air transport, marine transport and savings banking.

The rating firm said the EU and the U.S. account for 12.8 percent and 7.5 percent of local semiconductor producers’ exports.

“The recent debt crisis will have negative impact on recovery of demand in the advanced countries on a short and mid-term basis,” it analyzed.

According to the report, local semiconductor makers are projected to see exports decline by about 20 percent in coming months.

For the construction sector, the rating firm forecast that orders for public construction will drop. It issued the possibility of sluggish sentiment in the housing market, recalling difficulties during the 2008 global financial crisis.

In a similar vein, local savings banks could see another crisis, after being hit by toxic construction-related loans in the wake of the 2008 crisis, NICE Investors Service said.

“The current situation could hamper financial regulators’ effort to conduct a massive restructuring of the savings banking industry as well as delay their management normalization.”

The air transportation and marine transportation industries are projected to suffer worsening profitability and financial soundness, according to the report.

“Unlike the secondary banking sector, Korea’s commercial banks are expected to weather the eurozone debt crisis,” the company said, predicting side effects on the first banking sector will be restrictive.

But the report commented on the possibility that commercial banks could also see profitability and asset soundness worsen if global uncertainty eventually brings about Korea’s economic downturn.

Though the company said the automobile industry would also be affected by a drop in global demand, it forecast that Korean carmakers have less risk “as their export destinations have been diversified.”

“Many foreign carmakers are dependent upon markets in the U.S. and Europe,” it said.

For the credit card industry, the rating firm said that they could suffer from a liquidity crisis, pointing out that “credit card firms are heavily dependent upon issuance of corporate bonds for fund raising.”

But it seems that the government-led restriction on their foreign borrowing has lent them resilience against negative external factors, the company added.

By Kim Yon-se (kys@heraldcorp.com)