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Coronavirus outbreak likely to limit recovery in S. Korean exports: Moody's

All News 11:06 February 07, 2020

SEOUL, Feb. 7 (Yonhap) -- The outbreak of novel coronavirus in China will likely lead to a drop in demand in the world's second-largest economy, in turn limiting South Korea's shipments to China and causing a further delay in the recovery of South Korea's exports, a global credit rating agency said Friday.

"The outbreak of the coronavirus is credit negative for rated Korean companies in many sectors because it weakens consumer sentiment and spending inside and outside China, and poses risk of disruptions to production and supply chains," Moody's Investors Service said in a report.

The report insisted South Korea's retail and automobile industries will be most affected by the outbreak in China.

"The two Korean retailers E Mart Inc. and Lotte Shopping Co., Ltd. could see a significant decline in revenue and earnings because customers are limiting their trips to brick-and-mortar retail stores to avoid crowds amid the outbreak," it said.

The report comes amid concerns that many South Korean manufacturers, including leading automakers Hyundai Motor and Kia Motors, may soon be forced to shut down their production facilities here due to a shortage of parts and materials from Chinese suppliers.

"Companies in these two sectors will also be hurt by the dampening effect of the outbreak on economic conditions and consumer sentiment. A further softening in consumer demand for auto and tech products can postpone the recovery of these sectors' operating performance, which had already weakened amid sluggish Chinese demand during 2019," the Moody's report said.

South Korea's exports sank 10.3 percent on-year in 2019, partly on a sharp decline in exports to China, the world's single largest importer of South Korean products, caused by the prolonged U.S.-China trade dispute.

The country's exports to China tumbled 16 percent from a year earlier last year.

Seoul's outbound shipments were earlier forecast to rebound and post 3 percent on-year growth this year,.

Moody's said the outbreak in China may also begin to affect South Korea's other industrial sectors, including the refining, chemicals and steel industries "because China represents the single largest source of demand for these industries."


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