The value of transactions between Korea’s 10 biggest conglomerates and their affiliates hit a record high last year despite the government’s efforts to reduce it

June 12, 2014 Leave a comment

Updated : 2014-06-04 11:12

Internal trades still headache at 10 big firms

By Choi Kyong-ae

The value of transactions between Korea’s 10 biggest conglomeratesand their affiliates hit a record high last year despite the government’s efforts to reduce it, Chaebul. com said Tuesday.
The government has stepped up the “economic democratization” driveto curb business transactions between the country’s 10 big companiesand their affiliates through stricter tax and corporate regulations. 
The drive is aimed at providing a level playing field to all marketparticipants, whether they belong to big conglomerates or not. Butthere seems to be no tangible outcome from the efforts.
The value marked a record high of 154.2 trillion won ($150 billion) in2013, up 1.9 percent from 151.3 trillion won a year earlier, data offeredby the market research company showed. The 10 companies do notinclude public companies.
Of the 10 companies, five conglomerates ― LG Group, SK Group,Lotte Group, POSCO and Hanjin Group ― saw their internal tradesclimb. Five others ― Samsung Group, Hyundai Motor Group, HyundaiHeavy Industries Group, Hanwha Group and GS Group ― posteddeclines in internal business contracts, according to the data.
The value of internal trades at SK Group jumped 15 percent to 40.52 trillion won last year compared to a year earlier. LG and Lotte reporteda 7.5 percent and a 4.4 percent increase in the trades at 16.45 trillionwon and 8.92 trillion won, respectively.
When it comes to the ratio of internal trades to overall trade volumes,SK, POSCO and Hyundai Motor Group reported 26 percent, 22 percentand 21 percent, respectively, last year.
However, Samsung Group reduced its internal trades 5 percent to26.74 trillion won, with the ratio lower at 8.41 percent. Hyundai HeavyIndustries and Hanwha also reported declines in internal trades.Hyundai Heavy’s internal trades fell 14 percent to 6.23 trillion won, andHanwha’s slid 14 percent to 2.12 trillion won.
But, “the survey results show that the 10 companies have increasedtransactions with their overseas affiliates instead of domestic ones,”Chaebul. com said in a statement at its web page.
As the local law charges higher taxes on internal trades in Korea,companies are now looking to increase trade with their overseasoperations further, the stock evaluating site said.
For example, Samsung Group’s internal trade at home fell 5 percent to26.74 trillion won last year but trade with its overseas units jumped 39 percent to 171.73 trillion won, it said.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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