The Minute to Read (Weekdays) series provides a quick overview of significant events in Korea everyday, conveniently condensed into a one-minute read. Here’s a recap of what happened yesterday: July 8.
Samsung Electronics shares surge on earnings surprise, eyeing 90,000 won
Samsung Electronics’ stock continued its upward trend on July 8 following a surprising second-quarter earnings report, raising expectations for shares to reach 90,000 won. Analysts remain optimistic, with Hyundai Motor Securities’ Roh Geun-chang increasing his price target to 110,000 won. The average target price is now 104,826 won. By 9:23 a.m., Samsung shares traded at 87,600 won, up 0.57% from the previous day, reaching a one-year high of 88,500 won earlier. The stock’s rise is attributed to Samsung’s preliminary consolidated operating profit of 10.4 trillion won for Q2, a 1,452% year-on-year increase and 25% above market forecasts, with revenue rising 23% to 74 trillion won, driven by the AI market and semiconductor improvements.
Two-thirds of South Korean companies see credit ratings fall
In the first half of this year, two out of every three South Korean companies saw their credit ratings and outlooks downgraded, primarily due to the prolonged high-interest rate environment and poor performance in sectors like construction and petrochemicals. Savings banks were notably impacted, with over half experiencing downgrades due to real estate project financing insolvencies. Downgraded credit ratings lead to higher borrowing costs and a greater risk of default, compounding financial challenges for affected companies. This trend raises concerns about a potential “domino default” effect that could exacerbate the already fragile South Korean economy, which is grappling with real estate insolvencies, rising household debt, and weak domestic consumption. The major domestic credit rating agencies, including Korea Ratings, Korea Investors Service, and NICE Investors Service, reported a significant increase in downgrades compared to the previous year.
South Korean government’s borrowing from central bank hits all-time high
In the first half of this year, South Korea’s government borrowed a record 91.6 trillion won ($66 billion) from the Bank of Korea due to insufficient tax revenues. This is the highest amount ever borrowed since such statistics began in 2011. The government repaid 71.7 trillion won, leaving a loan balance of 19.9 trillion won. This borrowing exceeded amounts from the first halves of 2020 and 2022, driven by sluggish tax revenue growth, particularly from decreased corporate taxes due to significant losses in the semiconductor sector. National tax revenue from January to May was 151 trillion won, only 41.1% of the annual target. Despite these challenges, the Finance Ministry stated that these temporary loans are a standard fiscal management tool within the National Assembly’s permitted range and are not a significant issue.
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