Won may put firms’ ratings under threat

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Won may put firms’ ratings under threat

Local companies could have their credit ratings lowered this year due to the impact of the recession and the fast-rising Korean won against the U.S. greenback.

“For Korea, Moody’s expects downward rating pressure on private sector companies in general, mainly driven by a sluggish housing market and subdued private consumption, the won’s appreciation and the aggressive investment strategies of Korean firms, despite the limited financial cushions for their rating levels,” Moody’s warned in a report released yesterday.

This contrasts with the situation in other Asian economies but not Japan.

“Moody’s expects fewer negative rating actions for corporations in Asia in 2013 versus 2012, based on our central macroeconomic scenario that the Asian region (ex-Japan) as a whole, will significantly outperform the weak global economy,” said Clara Lau, a Moody’s group credit officer.

“Moody’s expectation that economic conditions will be largely unchanged in 2013 suggests a gradual shift towards more stable rating trends overall, and modest improvements in the credit trends for some industries,” Lau added.

The report said in recent months key sectors in China have shown signs of resurgence, such as improvements in property prices and retail sales.

The credit rating agency speculated that China may post economic growth of between 7 and 8 percent next year. Last year, it expanded 7.8 percent. This marked the first time in 12 years it has dipped below 8 percent. However, it still beat an early target of 7.5 percent. The better-than-expected growth was largely thanks to a nascent recovery in the fourth quarter.

The report said the ratings of Chinese companies would stabilize thanks to ample market liquidity, modest sales growth and more public investment in infrastructure projects.

Indonesia and India will remain almost the same as last year as they are underpinned by economic growth.

But the report warned that Indian companies will still face weak infrastructure support and regulatory constraints.

By Lee Ho-jeong [ojlee82@joongang.co.kr]

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