Market Insight of the Korea Economic Daily asked 26 chief financial officers of Korea's top corporations whether their companies are willing to invest this year. To this, 11 said they have no plans as of yet while seven answered they would not invest this year. That means 69 percent of large corporations have defensive investment strategies. Even to a hypothetical question whether they are willing to invest if they have enough retained earnings, most respondents said they would pay back debts first.
As companies are more defensive in their investment strategy, the need for accumulating cash emerged as the most important task for the CFOs. Out of the 26 CFOs, three said cash accumulation would be the most important task for the year, while ten answered cash accumulation is the second and third most important strategic tasks. Chang Seok-in, senior research fellow with the Korea Institute for Industrial Economics & Trade, said, "It seems major corporations are turning to a strategy to pay back debts as quickly as possible while trying to turn the situation around with mergers and acquisitions."
Some of the corporations that have completed their restructuring effort and debt paydown earlier than other may be more aggressive this year in investment. This is especially so given the current won-dollar exchange rate of 1,100 won per dollar is likely to continue for the time being, which will create a favorable condition for exporting companies. That's probably because CFOs of a few companies said they would be aggressively engaging in new growth engine discovery and overseas business expansion efforts in 2015. An executive with a credit rating agency concurred by saying, "Some companies may consider this year the best time for increasing investment in new capacity and R&D as oil prices tumbled down and the dollar gets stronger against the won."
Source: The Korea Economic Daily
