Hyundai shares fall: Shares in Hyundai Heavy Industries fell by over 25% on Wednesday. This was in reaction to Hyundai plans to raise funds. Hyundai investors did not take kindly to the company’s plans to raise funds by issuing new shares. Hyundai Heavy Industries is the largest shipbuilder in the world in terms of sales.
The new Hyundai share issue is intended to raise a further $1.2 billion US. The obvious result of this will be to reduce the value of existing Hyundai shares. However, if so, it is a move which is not popular with existing shareholders. It should have been evident to the company that its financial supporters up till now would be reluctant to accept any effective downgrading of the value of their shares which this move is.
Hyundai Shares Fall by Over 25%
In fact, shares in Hyundai dropped in value by over 25%. This is a full one-quarter of a reduction in the value of current shareholdings. Hyundai claims that the new money would help support the company’s finances which it alleges had been failing lately. The company has stated that it has been badly hit by an industry wide slump in demand. This was brought about by a combination of overcapacity and a lack of demand for its products worldwide. Competition from China is another issue.
Chinese Competition and Poor Hyundai Profits
Hyundai is not the only company to suffer from Chinese competition. Hanjin, the giant shipbuilding company based in South Korea, filed for bankruptcy in 2016 because of competition from China. Hyundai may not be far behind it! Hyundai made it clear earlier this week that it’s 2017 and 2018 profits would be bad.
The company’s operating profit forecast for this year, ₩46.9 billion Korean ($43.6 million, £32.6 million), is almost only 65% of last years. Hyundai also announced that its Oilbank refinery would be listed separately on a local stock market. All of this has resulted in Hyundai’s share values dropping by 29% in Seoul.
Is South Korean Industry Under Threat?
This is a blow to Hyundai and South Korean industry. However, is this no more than a glitch in the South Korean company’s fortunes? Will it rise again next year with increasing share prices or is this a serious blow to the South Korean economy? Is South Korean industry under threat from China?
Only time will tell, although it appears as if the Chinese shipbuilding industry is a serious source of competition. Korean businesses will need to stay alert in the face of rising competition from China. Many other Asian businesses will face similar competition, although for now it is fair competition. Time will tell! For now, Hyundai shares fall in value due at last in part to Chinese competition.