S. Korea's business community girds for uncertain future

SEOUL, Aug. 9 (Yonhap) -- South Korean companies are scrambling to determine the extent of the fallout from the first-ever U.S. credit rating cut in a bid to brace themselves for future uncertainties, sources said Tuesday.
Large businesses all predicted that mounting concerns over the health of the U.S. economy and persistent debt problems in Europe will inevitably affect the global financial market and the South Korean economy.
The decision by Standard and Poor's Ratings Services (S&P) to cut its credit rating of U.S. government bonds to "AA+" from a sterling "AAA" late last week has rattled the global financial market, causing stock prices to plunge and destabilizing foreign exchange rates.
Such developments, the business community said, may force a reassessment on investments, mergers and expanding production capabilities and how to maintain export growth that is critical for the country's economic health.
Samsung Electronics Co., the world's largest memory chipmaker, said it is keeping close tabs on developments as they unfold.
"At present, the impact has not really affected daily economic activities or demand," an executive who declined to be identified said. "While the S&P decision was unexpected, analysts had predicted sluggish growth in the third quarter."
At the moment, Samsung has no plans to cut back on the 23 trillion won (US$21.1 billion) it planned to invest this year, he said.
Hyundai Motor Group, the world's fifth-largest carmaker, said that the current situation could be bad for business since it raised overall uncertainties that can cause people to hold back on buying new cars.
"Although we are worried about the latest developments, we did not forsee immediate problems in investment and production," it said.
Leading steelmaker POSCO said that it has begun an extensive risk management process to reduce exposure to outside shock and is gearing up to respond to changes, while airlines and shipping companies are anticipating possible a drop-off in trade that could affect profits.
Other local companies such as CJ Group and SK Group said that despite the rising level of uncertainties, they will move forward with large merger and stock purchase projects.
CJ is moving to buy up Korea Express Co. for around 2.1 trillion won, while SK is moving to buy a stake in Hynix Semiconductor Co. for about 2.4 trillion won.
Both family-owned conglomerates said that they did not anticipate funding problems that could disrupt the deal.
Related to the unfolding situation, the Korea International Trade Association (KITA) said the global economy will likely experience slower growth, but more time is needed to determine if the United States will experience a so-called double dip.
"If the U.S. economy is hit hard by slow growth, South Korean exports of cars, mobile phones and auto parts will be hurt, which would affect the economy," it said.
KITA, however, said that because the United States accounts for 10 percent of the country's exports, South Korea may be able to withstand a decrease in sales for the short term.
yonngong@yna.co.kr