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Heavy industries' market cap tumbles on weaker yen

Jan. 27, 2013 - 11:13 By 양승진

South Korea's listed heavy industry companies saw their market capitalization plunge by 34 trillion won ($32 billion) in the last four months, hit by the Japanese yen's rapid descent, industry data showed Sunday.

   The combined market cap of local heavy industry firms, including automakers and shipyards, tumbled 19.2 percent to 142.8 trillion won as of last Friday, compared with the 176.8 trillion won tallied on Sept. 17, 2012, the highest number recorded for the second half of last year, according to local financial information provider FnGuide Inc. and industry data.

   Their current market cap value is down by nearly 13 trillion won from the lowest tallied last year, when it had stood at 159.3 trillion won on July 25, the data showed.

   Heavy industries have been one of the leading sectors that drive the local economy, Asia's fourth-largest, which heavily depends on exports for growth.

   As of last Friday, the proportion of heavy industries in the Seoul bourse reached 12.9 percent, coming in third in the total market cap after tech stocks with 26.5 percent and financial issues at 13.4 percent.

   But the yen's recent depreciation has weighed down the heavy industry sector, as a weaker yen makes the Korean won relatively stronger and hurts profitability.

   Companies that sell their products to Japanese counterparts earn less due to a stronger won, while those who vie with Japanese firms in the global market lose their competitive edge because their rivals' products get cheaper. According to Korea's central bank data, the yen fell nearly 20 percent against the won in 2012.

   To brace for exchange rate risks, the local auto industry, including No. 1 Hyundai Motor Group and its smaller affiliate Kia Motors Corp., have revised their outlook for the foreign exchange market this year and been accordingly drawing up their management plan from scratch.

   "We had estimated a 200 billion won loss in revenue when the won-yen cross-rate fell 10 won, but that factored in no currency volatility. We expect real damages are much worse given the pace of the weaker yen and that our shipments have increased recently," a Hyundai Motor official said.

   Meanwhile, a separate index gauging the contributions of each listed sector to the benchmark KOSPI's gain showed that heavy industries came in at negative 11.21, while those of tech and financial shares stood at 47.37 and 17.51, respectively, according to the data. (Yonhap News)