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Uncertainties hinder Korean firms' rating upgrade: S&P

2018/07/12 16:19

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SEOUL, July 12 (Yonhap) -- South Korean companies have enjoyed improvement in their credit ratings over the past few years, but growing economic uncertainties could halt that momentum, Standard & Poor's said Thursday.

"Korean corporate credit quality has improved over the past several years thanks to strong exports, stable oil prices, and their product differentiation efforts," said Park Jun-hong, an analyst at the global market appraiser.

Citing rising uncertainties associated with protectionism, aggressive financial policy and regulatory risks as major headwinds for export-dependent economies like South Korea, the expert said further improvement in the overall credit quality for local firms could be limited.

S&P rates a total of 37 South Korean firms, including tech giant Samsung Electronics Co., top steelmaker POSCO, and major chipmaker SK hynix Co. Of them, around 60 percent are rated between BBB- and A- categories, with 84 percent of the business entities having stabled outlook, 5 percent positive and 11 percent negative.

"Regulator and policy shifts in such sectors as electricity, distribution, telecom, and toll-road could place burdens on the firms," Park said, while expressing concerns over the companies' recent "aggressive capital expenditure and shareholder return policy that caused a decline in free cash flow.

In a separate report, Kim Eng Tan, S&P's senior director, said the recent summit between United States President Donald Trump and North Korean leader Kim Jong-un has not fundamentally changed the situation on the Korean Peninsula.

"Credit risks will improve markedly only if the incentives for North Korea to engage in destabilizing activities diminish significantly and the economic and social gap between the two Korea narrow meaningfully," he said.

graceoh@yna.co.kr

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