Top10 chaebol hit by $716m FX losses

2013-11-25 17:12

Top10 chaebol hit by FX losses

By Na Jeong-ju
The country’s top 10 business groups suffered some 760 billion won ($716 million) in losses so far this year due to the won’s gain against the dollar and the yen, according to data released Monday. The damage from volatility in the currency market is expected to grow further amid forecasts that the won may continue to gain ground until early next year.The won-dollar rate is hovering between 1,055 and 1,065 won after hitting a yearly low of 1,054.3 won early this month. Some analysts say the break-even point for Korean exporters is 1,030 won.
Data from chaebul.com, which tracks Korean conglomerates, showed 83 listed firms under the country’s top 10 business groups lost the 760 billion won during the January-September period due to the won’s strength.
Samsung Group saw its net foreign exchange losses reach 289 billion won, compared to a loss of 171 billion won tallied a year earlier.
Hyundai Motor Group lost 219 billion won due to the won’s gain, compared to a gain of 244 billion won a year earlier.
SK Group and LG Group also lost 201 billion won and 282 billion won, respectively.
Hyundai Heavy Industries was the only firm among the top 10 conglomerates to post a gain at 96 billion won.
By affiliates, Samsung Electronics suffered a net foreign-exchange loss of 271 billion won, plunging from a net deficit of 132.3 billion won tallied a year earlier. It was followed by LG Electronics with a net loss of 258.8 billion won.
LG Economic Research Institute said in a recent report that the value of Korea’s exports drops 5 percent, if the won gains 10 percent against the dollar.
“Many Korean exporters will find it difficult to make profits by selling goods overseas if the won-dollar rate falls below 1,030 won,” said an LG official.
Analysts say the won’s appreciation reflects the country’s growing current account surplus and strong economic fundamentals.
However, the gain is feared to dampen Korea’s recovery momentum. The stronger won has cut the earnings of exporters and damaged their price competitiveness on global markets.
Some currency dealers speculate that the government and the Bank of Korea (BOK) may take joint measures to curb the appreciation. Finance Minister Hyun Oh-seok recently called for the need to slow the pace of the won’s rise, saying the problem is raising uncertainties for the economic recovery.
The ministry has asked public firms to avoid borrowing dollar-denominated loans for the time being as part of efforts to protect the won’s value.
“The government may move to tighten regulations on derivatives trading and impose taxes on purchasers of Korean bonds if the won continues to gain strength,” a currency dealer said.
According to Hana Institute of Finance, affiliated with Hana Financial Group, the rate may fall to 1,020 won late next year after hovering around 1,050 won.
“Behind the won’s gain in recent months are an influx of foreign capital and the growth of the current account surplus. Next year, economic uncertainties and currency market volatility will ease, but the won is expected to continue to gain ground,” the institute said.