One of 5 listed firms saw cashable assets halve this year

One out of five South Korean firms listed on the Seoul main bourse saw their cashable assets more than halve this year, data showed Monday, raising concerns on their liquidity conditions. A total of 128 companies, or 20.3 percent, of 632 tallied firms saw their cashable assets plunge more than 50 percent in the first six months of this year, according to the data by the Financial Supervisory Service and the Korea Listed Companies Association. Around 92 percent of the 128 firms were small- and mid-size enterprises (SME), the data showed. Cashable assets refer to deposits and installment savings that can be liquefied within three months after maturity. A fall in cashable assets indicates a deterioration in corporate liquidity. The tally includes companies that close their books in December and does not include financial firms. Around 34 percent of the tallied firms saw their cashable assets decrease by more than 30 percent, while some 9 percent saw the respective figure plunge more than 70 percent in the January-June period, the data showed. Overall, the 632 companies' combined cashable assets slipped 7.6 percent from the end of last year to 48.1 trillion won (US$40.8 billion) as of end-June. Market watchers said the decrease mainly came as the costs spent on repaying debts or making new investments exceeded cash inflows. In the first half, companies spent 43.8 trillion won on new investments but generated 33 trillion won from sales. "Companies set up aggressive investment plans in the beginning of the year on hopes the economy would continue to be on a recovery track. But their cash holdings decreased amid the European debt crisis and a worsening environment for sales," said Ahn Seong-ho, an analyst at Hanwha Securities Co. Industry officials raised concerns the trend could possibly lead to a cash crunch for SMEs. "SMEs' fund conditions are similar to that during the 2008 global financial crisis or even worse. There are company owners who filed for bankruptcy or simply ran away," said an owner of a Seoul-based electronics firm.