Businesses more concerned about effects from eurozone debt crisis


Major listed companies in South Korea saw North Korea as less of a risk than the European debt crisis for their business next year, despite concerns of instability in Pyongyang following Kim Jong-il’s death.

South Korea’s top 20 listed businesses in terms of aggregate market value said they were much more perturbed by the fiscal predicaments in Europe than they were by North Korea. They were, however, worried about currency exchange rate volatility due to greater perils from north of the border.

“The North Korea factor is not our priority in mapping out next year’s management plans,” an official at Samsung Electronics said.

“We will rather make plans based on various scenarios of the debt crises in Europe.”

A Hyundai Motor official also said the North Korean factor wouldn’t have any immediate impact on companies.

“The economic insecurity in Europe is the largest uncertainty which is most importantly considered in drafting next year’s management plans,” he said.

Apart from the 123 small and medium-sized companies running factories in the joint industrial park in the North’s border town of Gaeseong, there is no business going on between the two Koreas.

Large conglomerates here believe that unless there is a significant change for the worse in North Korea, corporate earnings or fundamentals will be unaffected.

The conglomerates’ listed companies picked the European situation as the top factor for consideration because a further reduction in European demand would deal a blow to Korea’s exports.

“For companies that rely greatly on exports, deterioration in export markets would be a more tangible risk,” said Bae Sang-geun, chief of economic research at the Federation of Korean Industries.

A Hyundai Heavy Industries official said his company was closely watching European economies as exports account for 90 percent of its sales.

An official at Shinhan Financial Group said the debt quandary in Europe imposed a much greater burden than North Korea.

Companies here are also paying attention to the currency rate fluctuations and political risks related to South Korea’s general and presidential elections next year.

Officials in POSCO and LG Electronics said they were keeping tabs on the fluctuations and their impact on the markets.

The weaker the Korean won, the more taxing it is for companies that use a lot of imported raw materials.

A depreciation of the domestic currency could raise prices, hurting businesses that depend mostly on domestic sales as well.

Ahead of the general elections in April and presidential vote in December, companies are wary of politicians’ anti-corporate campaign pledges. An increase in government spending due to rash campaign promises could cause inflation, they warn.

By Kim So-hyun (sophie@heraldcorp.com)