Minister's Hyundai comments

Comments made by Minister of Finance Lee Hun Jai concerning the Hyundai group have sent shock waves through the financial market. Minister Lee stated at a recent FKI seminar that the imminent workout of Hyundai Construction was unfounded and that the company`s financial situation was not so serious.

However, the market did not accept the Minister`s remarks at face value. It was widely understood that Hyundai Construction was beyond the workout stage. To make matters worse, Korea Management Consulting & Credit Rating Corporation (KMCC) downgraded the credit ratings of Hyundai Construction and other Hyundai affiliates. The market understandably suffered as a result.

On the 24th, the KOSPI plunged by 45 points, rekindling fears of another Black Monday, and Hyundai Construction closed near its daily low limit. There are even concerns that the liquidity crunch ignited by Hyundai Construction might adversely affect the funding market. This time around, the market took Minister Lee`s words as a warning. One fund manager even pointed out that the Hyundai group is in fact failing to adhere to its rehabilitation plans.

In reality, former honorary chairman Jung Joo-Young`s declaration that his direct family members would no longer participate in Hyundai`s management is meaningless. Jung recently signed an agreement with North Korean leader Kim Jung-Il related to development projects. The only explanation is that he signed the accord in his capacity as a shareholder.

Furthermore, the spinoff of Hyundai Motors from the group has become a tug of war between the conglomerate and the Fair Trade Commission, and little progress has been made. There are visible worries in the market that the liquidity problem that lurks beneath the company`s surface could flare up at anytime.

In the market, the Hyundai group and the government seem equally at fault. Both Hyundai, which is surviving by taking the market hostage, and the government, which is pointing fingers at a certain group, are doing little to remedy the situation. As the effects of this spread, Minister Lee stressed at a press conference on the 25th, everyone has grown nervous, and must not misconstrue his comments. The weak psychological state of the financial market means hazards abound.