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S. Korea too dependent on Samsung, Hyundai Motor

Publication Date : 06-09-2012

 

The Korean economy holds a critically risky factor as it has been heavily dependent upon the two largest conglomerates ― Samsung and Hyundai Motor, economists say.

Their worries and skeptical view over the nation’s economic structure revolve around the fact that earnings of Samsung Group and Hyundai Motor Group account for a great portion of the nation’s gross domestic product.

The economy of Finland was led to “falter” due to its flagship Nokia losing ground in the global mobile telecommunications and smartphone market, former Morgan Stanley economist Andy Xie told a local news provider.

Issuing the possibility that Korea may follow a Finnish-like difficulty, he said it is necessary for the country to “disperse competitiveness” among the other business groups.

According to data from the Korea Exchange and chaebul.com, a conglomerate-tracking website, Korea saw the earnings gap between Samsung-Hyundai Motor and the other eight major groups widen this year.

During the first half of the year, Samsung and Hyundai Motor accounted for more than half of the combined operating profit of all companies listed on stock markets.

Samsung reported an operating profit of 11.6 trillion won (US$10.4 billion) in the first half, up 59.8 per cent over the same period last year. Hyundai Motor saw its operating profit increase 12.5 per cent to 6.4 trillion won on a year-on-year basis. The two groups’ combined operating profits amount to 50.6 per cent of the total operating profits made by all listed companies except for financial firms.

In contrast, LG, SK and Lotte groups suffered a drop in operating profit by 4.5 per cent, 31.3 per cent and 37.5 per cent, respectively.

Hyundai Heavy Industries and GS Group reported a 49.4 per cent and 47.8 per cent fall in first-half earnings. Similarly, Hanjin Group posted a deficit of 258.8 billion won.

Earnings of Samsung accounted for 32.6 per cent of the combined figure of the 10 groups, compared to 17.8 per cent a year earlier. Hyundai Motor’s proportion climbed from 14 per cent to 18 per cent.

Foreign investors are cutting back their stakes in major Korean companies amid a sliding stock market hard hit by the European debt crisis.

But they are expanding ownership at Samsung and Hyundai, according to chaebul.com.

Ninety-three affiliates of the nation’s top 10 conglomerates saw their combined foreign ownership decline from 20.1 per cent in March to 19.7 per cent in July, it said.

 

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