Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Moody's maintains negative outlook for E-mart, SK hynix, SK Innovation
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By Park Jae-hyuk
LG Energy Solution's IPO raises positive outlook for LG Chem
By Park Jae-hyuk
Moody's Investors Service maintained its negative credit outlook for E-mart, SK hynix and SK Innovation, citing their continued debt growth, stemming from large capital spending or the acquisitions of other companies.
SK geo centric was also facing a negative outlook, due to the chemical company's credit linkage with its parent, SK Innovation.
“Of the 22 private sector companies we rate, 17 have stable outlooks, four have negative outlooks, and one has a positive outlook,” Moody's analyst Sean Hwang said Wednesday during an online press conference on the credit rating agency's outlook for Korean non-financial companies.
LG Chem was the only private sector company with a positive outlook.
Moody's cited the chemical firm's strong earnings and potential listing of its battery subsidiary, LG Energy Solution (LGES), which submitted its prospectus Tuesday to the Financial Services Commission to go public on Jan. 27.
“Battery producers' debt will continue to rise, unless large equity financing is raised,” Hwang said, indicating that the initial public offering of LGES will help its parent company curb its debt growth.
Based on the forecast that Korea's GDP will grow 3.2 percent next year, after growing 4 percent this year, Moody's expected most companies here to maintain “largely stable leverage metrics” and enjoy solid earnings.
Supply chain imbalance, however, was viewed as a risk that could cause a divergence of sector conditions, limiting earnings improvements for automotive and technology companies.
“Margins in the technology, steel and chemical sectors will soften moderately from this year's high levels, as supply-demand dynamics weaken,” Hwang said.
Korea Investors Service (KIS), the domestic subsidiary of Moody's, expects more local firms to avoid credit rating downgrades or negative outlooks next year, due to the economic recovery from the COVID-19 pandemic.
“The resurgence of the coronavirus will have a limited impact on the economy, although we will continue to monitor each country's quarantine rules and the economic impact of the pandemic,” said KIS senior analyst Won Jong-hyun, who also participated in Wednesday's press conference.
The credit rating agency, however, warned of movie theaters, hotels and duty free shops' continued slump in performance, citing reduced demand, caused by stricter regulations on overseas travel and gatherings.
Banks warned of rate hikes
Regarding its outlook for Korean financial companies, Moody's said in a separate press conference a day earlier that potential interest rate hikes will be the key risks for domestic banks next year.
According to the U.S. credit rating agency, Korea's rate hikes will weigh on businesses and households here, both of which have shown high debt ratios lately.
“The extension of debt maturity has allowed banks to maintain their asset qualities, but changing economic conditions and government policies in the future could have a significant impact on their asset qualities,” Moody's senior analyst Ok Tae-jong said.
Moody's, however, predicted that the overall profitability of domestic banks will remain stable, because the growth of their net interest margins, caused by interest rate hikes, can offset their rising credit costs.