Korean conglomerates continue to hoard cash

Korea’s leading conglomerates had some 116 trillion won ($103.29 billion) in cash or cashable assets as of the end of March this year, an increase of 54 percent from five years ago, data showed Monday, a sign that the companies remain hesitant about investing.

Seventy-two companies were analyzed by the Korea Exchange, the local stock market operator, after 28 of the top 100 market cap firms were excluded because their assets could not be measured on an annual basis. The results showed that the firms held an aggregate 115.7 trillion won in cash or assets readily convertible to cash.

This represents a solid increase from 115.2 trillion won tallied at the end of last year and up from 75.2 trillion won at the end of 2012.

Total assets by these companies came to 1,907.9 trillion won, up a sharp 37.2 percent from the end of 2012. Consequently, the proportion of their cash assets to total assets rose to 6.07 percent as of the end of March compared to 5.41 percent at the close of 2012.

Increased cash holdings normally would indicate improved corporate financial stability, but in Korea’s case, they likely have more to do with reluctance to spend the money on business investment, market observers said.

“Cash assets are money held in reserve for company management and investment,” an official at the Korea Exchange said. “Companies that have increased net profits are apparently keeping the cash to facilitate more stable management.”

Samsung Electronics was the richest in terms of cash owned. It had 27.56 trillion won as of March, equivalent to 23.9 percent of all cash assets held by the companies checked. The tech firm’s total assets was 264 trillion won.

SK Group came next with 8.41 trillion won in cash.

Naver, operator of the country’s largest internet portal, had 1.85 trillion won, an increase of 368.9 percent from the end of 2012 for the biggest jump among the 72 companies analyzed.

For Hyundai Motor and Posco, their cash holdings diminished. In the case of the former, cash assets fell 3.3 percent to 6.75 trillion won. The fall was greater for steelmaker Posco, down 41.8 percent to 2.72 trillion won. YONHAP