Chaebol brace for difficult 6 months

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Chaebol brace for difficult 6 months

Korean businesses expect a tough second half after economic slumps both in and outside the country, but they are arming themselves with business strategies they hope will revitalize consumer sentiment and overseas sales.

The Federation of Korean Industries, which represents the interests of Korea’s conglomerates, conducted a seminar yesterday with industry analysts and economists.

The Korean economy is expected to grow by 2.9 percent this year, said Kim Do-hoon, president of the Korea Institute for Industrial Economics and Trade. Only a few of the nation’s flagship industries seem set for a rebound.

“External conditions will be risky in the second half because of uncertainties like the U.S. interest rate hike, a slowdown of China’s growth and the possibility of Grexit and the impact on the overall eurozone economy,” Kim said. “In the meantime, Korean manufacturers will be hit in export performance by the weak yen and low oil prices.

“But they have to keep moving to find new industries and innovate in the current flagship industries,” Kim added.

Participants generally agreed that Korea’s electronics, automotive and steel industries will slow, while construction and petrochemicals, which have suffered through a long downturn, should revive in the second half.

The construction industry should see good growth. Korea’s regulations on real-estate dealings will be eased in the second half and contractors should see more orders, said Kim Hyung-geun, a researcher at Meritz Securities. He added that foreign orders are expected to grow because of infrastructure projects in Iran and in Southeast Asian countries. But those Iran projects, he added, depend on a conclusion of nuclear negotiations and a lifting of sanctions.

The petrochemical industry is expected to see brisk overseas demand, particularly from China, which is focusing on domestic growth and stimulating the economy, according to Lee Eung-joo, a researcher at Shinhan Investment and Securities. That should increase demand for Korean petrochemical exports.

The electronics, auto and steel industries will see a much gloomier picture, as global economic conditions continue to deteriorate.

Electronics, particularly mobile devices, and automobiles are expected to face price competition from other suppliers, mainly because of a strong won against the yen and euro, said Kim Ji-san, a Kiwoom Securities analyst. Another analyst, Ko Tae-bong from Hi Investment and Securities, added that the absence of new models and an inventory overhang may also prevent the industry from rebounding. The steel industry is expected to face sluggish demand, mainly because of China’s lower production of goods containing steel.

The shipbuilding industry may see a reasonable but not exciting second half, thanks to increasing demand for value-added ships like liquefied-natural-gas carriers around the world. But a shortage of demand for oil drilling ships is expected to offset those successes; low oil prices are the culprit there.

Despite the gloomy forecasts, industrialists put on their game faces and said they would step up their efforts to tempt domestic consumers to open their purses. They see that strategy as helping them get through a tough half-year.

Hyundai Motor and Kia Motors said Tuesday they have scheduled foreign-dealer and customer promotions and foreign employee training sessions in Korea as a contribution to the domestic tourist and service industries. The events will begin this month and continue through November.

Hyundai has a global auto repair technicians’ skill contest and a customer service workers’ seminar scheduled during the coming five months.


BY KIM JI-YOON[kim.jiyoon@joongang.co.kr]

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