IT firms, banks face bleak outlook

By Lee Hyo-sik

Things are not likely to improve much for most listed firms here in the fourth quarter as the global economic downturn continues to further dampen business performances, according to online stock information provider FN Guide, Monday.

Samsung Electronics and other information technology firms are expected to post sluggish results in line with falling demand for Korean products, both at home and abroad, and intensifying competition with foreign rivals.

Banks and other financial firms will also likely perform poorly due to rising bad loans and falling interest rates.

However, shipbuilders, refiners and steelmakers, who have posted dismal performance so far this year, are projected to find some upward momentum in the final quarter. Cosmetics makers, travel agencies, hotels, casinos and other businesses catering to foreign tourists will also see with better results.

FN Guide said the fourth quarter operating earnings outlook for 114 major listed firms will reach 31.3 trillion won, down 5.4 percent from the previous quarter. Their combined net profits are also expected to fall 4.7 percent to 24.4 trillion won.

It said the continued economic slump in the eurozone and the slowing Chinese economy will weigh heavily on Korean exporters, adding the prolonged sluggish consumer demand will further aggravate corporate performances.

According to the Bank of Korea, Asia’s fourth largest economy grew only 0.3 percent in the second quarter, down from 0.9 percent growth in the first quarter. Some economists project Korea’s gross domestic product could stall or contract in the third and fourth quarters.

``Given a host of uncertainties surrounding the Korean economy at home and the situation overseas, it is hard to project the fourth quarter outlook for listed firms,’’ said Kyobo Securities analyst Kim Hyung-ryoul. ``Despite the latest quantitative easing by the U.S. Federal Reserve and the European Central Bank’s bond purchasing, they have not yet helped boost activities in the real economy. The monetary expansion has only increased stock prices.’’

Kim said information technology firms have so far performed well thanks to their strengthened global competitiveness. ``But their momentum will likely lose steam toward the year’s end due to soaring marketing costs and fiercer competition. Banks and other financial firms are also expected to post sluggish results in the fourth quarter.’’

Samsung Electronics will see its fourth quarter operating income and net profit decline 1.67 percent to 7.4 trillion won and 2.33 percent to 6.1 trillion won, respectively, from the third quarter. LG Electronics is also projected to sustain a 19.3 percent drop in operating profit at 218 billion won.

The combined operating income of the nation’s four largest financial groups for the third quarter is expected to drop 21 percent. Woori Financial Group will likely see its operating income plunge 34.5 percent to 466 billion won during the October to December period, compared with the previous three-month period.

However, loose monetary policies across the globe will hike the value of various commodities and create an upward inflationary pressure, Kim said, adding this will help boost the performance of refiners, chemical firms and steelmakers. Automakers are also expected to continue to post robust performance.

``Additionally, cosmetics makers, travel agencies and other consumer-oriented businesses catering to foreign visitors will see their fourth quarter results rise over previous ones.,’’ the analyst said.

POSCO is expected to post operating income of 1.25 trillion won, up 22.6 percent from the third quarter, with Hyundai Steel forecast to see an 11.7 percent jump in operating earnings.