By Kwon Mee-yoo
Listed small- and medium-sized enterprises (SMEs) might face a series of bankruptcies as their holdings of cash reduced significantly last year.
According to the Korea Exchange and the Korea Listed Companies Association, the total cashable assets of 612 listed companies in Korea, which settled accounts on Dec. 31, stood at 52.22 trillion won ($46.71 billion), a 3.4 percent decrease from the previous year.
Cashable assets include not just cash, but bank deposits and other financial products that could be turned into cash within three months. The lack of cashable assets could worsen liquidity conditions.
Most of the companies with less cashable assets are SMEs based on market capitalization. Among the 42 companies which suffered an over 80 percent decrease of cashable assets, only three of them — GS, Shinsegae Engineering & Construction and LG Fashion — were major companies, the rest were SMEs.
A prolonged bad economy prevented these SMEs from issuing company stock, increasing capital or getting bank loans.
Vulnerable industries such as construction, shipping and shipbuilding industry are also suffering cash shortages.
The amount of cashable assets owned by six listed shipping companies, including Hanjin Shipping and Hyundai Merchant Marine, was 1.8 trillion won last year, about 1 trillion won, or a 36 percent, drop from the previous year.
Thirty-six construction firms are in a similar situation with total cashable assets down 23 percent last year to 5 trillion won.
Six listed shipbuilding companies marked an average 6.3 percent decrease in cashable assets and the STX Offshore & Shipbuilding’s cashable assets plummeted 43.2 percent.
Listed companies suffer cash shortages, but financing from outside sources is difficult.
Commercial banks are reluctant to lend money to SMEs. As of last November, local banks lent 125.4 trillion won to large companies, which is a 26.6 percent increase from the previous year. In contrast, loans to smaller companies amounted to 462.9 trillion won, only 3.2 percent increased during the same period.
“During the financial crisis in 2008, extensive government expenditure boosted the economy, but there is no such way to prevent the economic downturn now and the sluggish situation is expected to continue,” Kwon Sun-woo, an economist at Samsung Economic Research Institute, said.
“More SMEs will face tougher circumstances as they have not completed restructuring.”