Hyundai Motor Company’s Stocks Continue to Drop Due to Negative Factors

Sep 12, 2017

Negative factors are added to stocks of Hyundai Motor Group due to placement of THAAD (Terminal High Altitude Area Defense) and downward trend of its rating by a credit rating agency. Hyundai Motor Company’s have become bearish after Kia Motors lost its first trial of a lawsuit regarding ordinary wages. Hyundai Motor Company was also placed out of top 500 based on global market capitalization for the first time.
According to Korea Exchange, Hyundai Motor Company’s stocks finished the market on the 11th at $119.39 (135,000 KRW) which is 0.37% reduction from previous business day. Hyundai Motor Group’s stocks are even worse as stocks of Kia Motors, Hyundai Mobis, and Hyundai-Wia are all showing downward trends.
Kia Motors’ stocks ended the day at $28.12 (31,800 KRW) which is 0.62% reduction from previous business day. Hyundai Mobis, which had its stocks fall by 4.66% in just one day alone on the 8th of September, watched its stocks fall by 3.56% additionally on the 11th. Stocks of Hyundai-Wia, which produces parts for Hyundai Motor Company, are also continuing to drop.
Based on an amount of global market capitalization calculated by Korea Exchange at the end of last month, Hyundai Motor Company was barely placed top 500 at 480th place followed by other top 500 South Korean companies such as Samsung Electronics (13th) and SK Hynix (285th).
However it is currently placed on 536th place with total market capitalization of $26.3 billion (29.7 trillion KRW). In just ten days, $1.77 billion (2 trillion KRW) of market capitalization was evaporated. In 8 years since Korea Exchange started this calculation at the end of 2010, Hyundai Motor Company was placed outside of top 500.
If Hyundai Motor Company is placed outside of top 500, there are only two South Korean businesses that are placed top 500. Hyundai Mobis and Kia Motors, which were placed top 500 five years ago, are already placed outside of top 500 as amount of their market capitalizations started to reduce.

Changes of Hyundai Motor company’s credit ranking by S&P’s over years (Reference: Hi Investment & Securities Co., Ltd.) <Changes of Hyundai Motor company’s credit ranking by S&P’s over years (Reference: Hi Investment & Securities Co., Ltd.)>

While Hyundai Motor Company’s sales volume decreased sharply by 47% compared to previous year due to placement of THAAD during first half of this year, it had to watch its Changzhou facilities of Beijing Hyundai, which is its joint company with Chinese Government, close its operation. Although operation resumed, Beijing Hyundai is still facing problems such as problems regarding delivery of parts.
“As obvious pressure from Beijing Hyundai is becoming visualized, it will be inevitable for automotive part manufacturers that entered Chinese market to be affected by it.” said Lee Jae-il who is a researcher for Eugene Investment & Securities Co., Ltd. “There will be many requests that will ask Hyundai Mobis and Hyundai-Wia, which are directly connected to Hyundai Motor Group, to reduce unit cost of their deliveries.”
International credit rating agency called S&P adjusted predictions of credit ranking of Hyundai Motor Company, Kia Motors, and Hyundai Mobis from ‘stable’ to ‘negative’. S&P listed deepened competitions in the U.S. market and Chinese market, geopolitical uncertainty regarding Chinese market, weak lineup of models, and conflicts between laborers and companies as reasons why it changed their rankings from ‘stable’ to ‘negative’.
“Excluding geopolitical risks from China that are impossible to control, there is a strong warning for lack of plans by Hyundai Motor Group towards improvement in quality and harmony between laborers and companies.” said Ko Dae-bong who is a researcher for Hi Investment & Securities Co., Ltd. “Turnaround for Hyundai Motor Group relies on new vehicles with competitive edge and improvement in new rising markets.”
Although it seems that foreign investors are continuing to purchase Hyundai Motor Company’s stocks, it is not wise for Hyundai Motor Company to continue to rely on foreign investors if it does not resolve lack of sales in Chinese market and the U.S. market. Efforts from South Korean Government resolving many difficulties that arise within automotive and distribution fields due to placement of THAAD are also needed.
“It will be difficult for Hyundai Motor Company to improve its performance in a short period of time due to many uncertainties.” said Kim Jin-woo who is a researcher for Korea Investment & Securities Co., Ltd. “As countries that are nearby South Korea are becoming more tensed due to THAAD and North Korea’s threat with nuclear weapons, it is likely that it will take some time for Hyundai Motor Company’s operation to become normal again.”
Staff Reporter Kim, Myunghee | noprint@etnews.com

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