Korea’s top companies grow more pessimistic

The outlook for Korea’s top 600 companies, which had turned optimistic in May, worsened in June amid challenging times both at home and abroad, according to a survey by the Federation of Korean Industries on Monday.

The Business Survey Index (BIS) on business prospects for the following month, which is based on a poll of Korea’s top 600 companies by revenue, fell to 94.8 for June from 102.3 a month earlier.

A score of 100 means that an equal number of participants responded positively and negatively to the survey questions. A reading above 100 indicates more companies are positive.

Since peaking at 101.2 in October last year, the BIS on business prospects maintained at the mid-80 to low-90 level until April. The surprise reading for May was the highest in seven months.

“The survey shows Korean companies feel the economy is in recession amid increased uncertainties around corporate restructuring coupled with the shrinking of internal and external demand,” said Song Won-geun, director at the Federation of Korean Industries

The federation said the temporary rebound in consumption from the government’s last-minute designation of May 6 - the day between Children’s Day and the weekend - as a public holiday is feared to be over.

Consumer sentiment may even worsen following a series of ongoing and impending corporate restructurings in the shipbuilding and shipping industries.

Local businesses may also be hit hard by the outcome of the U.S. Federal Reserve’s policy meeting on June 14-15.

In the event the Fed raises interest rates, international funds investing in raw materials are expected to be pulled into the United States, aggravating the economies of the Middle East and emerging markets.

The federation worries that outcome would also deal a blow to export-reliant Korean companies.

Another bad sign is that the upbeat outlook by Korean companies for May’s performance failed to materialize.

The separate BIS for businesses’ actual performances in May stood at 97.1, even lower than the 97.3 recorded in April.

This index has stayed below 100 for 13 straight months, indicating the nation’s corporate sector continues to struggle.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]