Moody's sees potential downgrades for China-reliant firms

The credit quality of non-financial companies in South Korea will remain broadly stable this year, but weak macroeconomic conditions may pose challenges for some sectors, Moody's Investors Service said Tuesday.

"China's economic slowdown will place carmakers, refiners, steelmakers and petrochemical companies on review for possible downgrade as they are highly exposed to demands from China," Chris Park, associate managing director at Moody's Corporate Finance Group, said in a press briefing held in Seoul.

Over the next 12 months, there will be more negative rating actions than positive ones. Almost 1 in 4 of the rated Korean firms, or 23 percent, have negative rating outlooks, much higher than the 9 percent with positive outlooks, he said.

A further slowdown in China's economy could wreak havoc on Korean exporters, particularly in the auto, steel and refining sectors, as well as domestic business-focused companies. China is the largest export market for South Korea.

China's economy grew 6.9 percent last year and is widely expected to slow down further in the coming years.

Despite their self-rescue efforts, Korea's non-financial firms now face bigger-than-ever challenges due to unfavorable business fundamentals.

Park said the electronics industry will also have a tough year due to lower global demand for memory chips and liquid crystal displays. (Yonhap)