New orders thin by 30% on qtr for Korea Inc. Q2 in sluggish sign in demand

2022.06.22 13:53:37 | 2022.06.22 15:18:52

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New orders for manufacturers and services providers publicly listed in South Korea shrank 30 percent in the second quarter compared with the previous three-month period to suggest reduced external and domestic demand over economic slowdown and inflation.

According to order disclosures, members on Kospi or Kosdaq reported combined 3.6 trillion won ($2.8 billion) worth of new sales and supply contracts from April 1 to June 17, off 30 percent from 5.2 trillion won reported from Jan 3 to March 20.

All Kospi-listed companies must disclose information on new contracts, like supply agreement, if the deal amount is equal to or greater than 5 percent of previous year’s revenue. Kosdaq firms are required to report deals equal or greater than 10 percent of previous year’s revenue. Kospi firms with market capitalization of 2 trillion won or greater must make the public disclosure for all deal amounting 2.5 percent or more than revenue.

Machine manufacturers, such as those supplying equipment to semiconductor, display and battery firms, showed the sharpest fall in new orders. They were behind 37 percent of total orders reported in the first quarter.

Local precision machine tool manufacturers, including secondary battery inspection system maker V-One Tech and semiconductor chip making machine firm Exicon who supply to Samsung Electronics and other major manufacturers in Korea, secured combined 1.1 trillion won worth of contracts in the second quarter, down 40 percent on quarter, as large manufactures adjusted down capital spending amid growing economic uncertainties at home and abroad.

Software developers and solution providers that were responsible for 8 percent of total contracts in the first quarter saw new orders plunge 91 percent on quarter to 38.8 billion won.

Construction industry, however, showed sharp growth in orders, logging 176 percent on-quarter jump to 1.2 trillion won.

Communication cable makers also reported greater orders of 84.9 billion won for the second quarter, doubled from 40.1 billion won in the first quarter, thanks to increasing demand for 5G network facilities. Those firms manufacturing power generators and other electric power related facilities had the amount of new contracts rise 43 percent to 205.9 billion won on growing investment in renewable energy sector.

Corporate sentiment is souring amid increasing downside risks in the economy at home and abroad.

The Business Survey Index, compiled by the Federation of Korean Industries, on companies’ business outlook for June stood at 96.3 and marked the third consecutive month of below 100. Figure below 100 means pessimism overwhelms optimism. Last time the index stayed below 100 for 3 months in a row was in February 2021.

By Kang In-seon and Cho Jeehyun

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