TOKYO (Reuters) -Toyota Motor Corp’s truck and bus unit Hino Motors on Thursday forecast a 6 billion yen operating profit for the fiscal year ending in March 2023, confounding analysts’ forecasts for a loss due to an engine data scandal.

However, it did not disclose operating income and net profit forecasts for the year, as it was unable to “reasonably” calculate losses attributed to the engine data scandal.

The truck maker became mired in a reputation-tarnishing emissions data scandal this year affecting 640,000 vehicles after admitting to falsifying data on some engines dating back to 2003.

And it had been expected to suffer an operating loss of 16.2 billion yen for the current business year, based on the mean forecast from a Refinitiv survey of 10 analysts.

Nevertheless, the operating profit forecast by the company was still 82% down on the previous financial year.

Hino said its forecast for a profit was based on predictions for a 22% increase in overseas sales over year ago levels, and a 36% drop in domestic sales.

It said that since September it has resumed delivering some medium-size and small-size trucks to the home market, after suspending shipments of some models in August due to the scandal.

For the July-September quarter, Hino posted a quarterly operating profit of 12.3 billion yen ($84.66 million), 21% less than a year earlier, but easily beating the mean forecast for a 1.66 billion yen profit given by a Refinitiv survey of seven analysts.

Although the domestic sales dropped by 33% for the first six months of the business year starting April, Hino’s sales to Indonesia, Thailand and the United States jumped during the period as a result of strong demand and the resumption of production in the United States, which had been suspended between December 2020 and October 2021.

The Japanese truckmaker is facing a class-action lawsuit in the United States, in which it and its parent Toyota have been accused of historical misconduct. Hino and its subsidiary in Australia are facing another lawsuit from customers who purchased, leased or acquired its trucks.

Hino president Satoshi Ogiso declined to comment on what impact possible damages from the lawsuits could have on business performance.

“We are still in the process of carefully considering and proceeding with the response,” Ogiso said.

Asked whether financial support would be required from Toyota, Hino finance official Toru Matsukawa said financing was not a problem for the company.

Hino became a Toyota subsidiary in 2001 and nearly all Hino presidents since have been Toyota employees.

The scandal has led to resignations of three executives and one senior official earlier this month.

Ogiso, who long worked for Toyota before becoming Hino’s president in 2021, kept his position but was disciplined, and made to forego half of his compensation for six months.

Hino has said that an inward-looking corporate culture and a management failure to engage sufficiently with workers had created an environment in which greater priority was put on achieving schedules and numerical targets than on following processes.

($1 = 145.2900 yen)

(Reporting by Satoshi Sugiyama; Editing by Muralikumar Anantharaman & Simon Cameron-Moore)

By Greg Torode

HONG KONG (Reuters) – Chinese President Xi Jinping’s new generals may have been selected for their political loyalty to him, but those ties could serve at least one vital military purpose in any Taiwan invasion plan: ensuring cohesion and decisiveness.

Although the Politburo’s seven-man Standing Committee would make the ultimate decision on any Taiwan action, the Central Military Commission would forge and execute the battle plan, eight Asian and Western military attaches say.

Three new generals were appointed to the top command body on Sunday after the Communist Party’s five-yearly congress – an event at which Xi said China would “never promise to give up the use of force” to take control of the self-ruled island.

Four security analysts and four military attaches say Russia’s Ukrainian quagmire has shown how vital speed – both in build-up and execution – would be to any Chinese plan, in part to prevent Taiwanese forces and international support from mobilising.

“If Xi Jinping is going to the pull the trigger on Taiwan, then he can’t afford any dissent from the Central Military Commission,” said Singapore-based strategic adviser Alexander Neill.

“To secure any kind of advantage they would have to move fast, lightning fast,” Neill added. “There is no room for dithering. That has always been Chinese thinking on Taiwan, and the Ukraine stalemate has confirmed the need to avoid getting bogged down in a slow logistical build up.”

In his first two terms, Xi purged thousands of officers on corruption allegations and has attempted to tighten the party’s control over the military.

Xi further strengthened his grip on his military command, with three new generals appointed to the seven-person commission and an extension beyond retirement age granted to his closest military confidante, General Zhang Youxia.

“This breaking of precedent is being used to his advantage to achieve two aims at once,” said James Char, a military scholar at Sinagpore’s S. Rajaratnam School of International Studies, referring to keeping Zhang in his post past retirement. “To ensure the PLA’s top soldier is someone well-versed in operational command and is politically reliable.”

The Chinese Defence Ministry did not respond to questions from Reuters.

Some analysts and attaches described the commission as a tightly interconnected group that blends operational experience and political loyalty while maintaining a link to China’s last shooting war, against Vietnam.

Zhang, 72, is described in the Pentagon’s 2021 report on China’s military modernisation as a People’s Liberation Army “princeling” whose father served with Xi’s father at the end of the Chinese civil war in 1949.

One of Zhang’s proteges, General Li Shangfu, was also promoted to the commission. Crucially, Li has experience with the People’s Liberation Army’s digitised strategic support forces, a body that covers electronic, cyber and space warfare.

General He Weidong will serve as the second vice-chairman below Zhang. He was promoted to the position after his command of the reformed Eastern Theatre Command, which is responsible for Taiwan operations.

He oversaw the unprecedented military drills and missile tests surrounding Taiwan in August that Beijing unleashed to protest the visit to Taipei by U.S. House of Representatives leader Nancy Pelosi.

General He is widely known to be connected to Xi through his service in the former 31st Group Army in Fujian during Xi’s time in that province, which faces Taiwan.

It is a background He shares with leading political commissar Admiral Miao Hua, who remains on the commission.

The new line-up straddles a military generation, given the promotion of General Liu Zhenli, who has been in command of forces around Beijing and has experience in the People’s Armed Police, China’s internal security forces.

Liu, 58, along with Zhang, has combat experience dating to the ill-fated conflict with Vietnam, which rumbled on to the late 1980s.

“That link to the problematic Vietnam campaign is a reminder that for all of the PLA’s advances in recent years, there is a glaring lack of modern combat experience,” said one Asian military attache, speaking on condition of anonymity.

“All the drills, exercises and parades can’t replace that. As cohesive as this team might be, there are glaring questions about the PLA’s ability to wage war – for them, and for those of us on the outside looking in,” added the attache, speaking on condition of anonymity because of the sensitivity of the matter.

Which member of the commission will serve as Defence Minister, replacing the retiring Wei Fenghe, will emerge when the National People’s Congress confirms a new governing team in March.

The position, which includes an extensive military-diplomatic role, is seen as less crucial than the work of the commission itself, which operates amid strict secrecy out of an imposing command centre in western Beijing.

(Reporting By Greg Torode. Editing by Gerry Doyle)

By Mathieu Rosemain

PARIS (Reuters) – Investors brushed off upbeat comments by STMicroelectronics’ boss on Thursday after the Franco-Italian chipmaker pointed to a slower pace of growth at year end, as falling demand for electronic products adds to fears of a global recession.

Shares of the Geneva-based company, whose biggest clients include iPhone maker Apple and carmaker Tesla, were diving by close to 8% at 0907 GMT, making the stock the worst performer of France’s blue-chip index CAC 40.

“Results are good but the outlook is disappointing,” a Milan-based trader said, noting general caution about the sector’s outlook.

Headwinds are building for the semiconductor industry, with rising Taiwan-China and U.S.-China tensions and red-hot inflation that could squeeze spending on cars, smartphones and other consumer products.

In a call with analysts, STMicro’s boss said twice that the company had high visibility on the group’s orders for the next six to eight quarters, with its manufacturing plants running at full capacity.

“This makes us very confident to drive the company on a trajectory of growth in 2023,” Jean-Marc Chery said, confirming the group’s target of $20 billion in yearly sales by 2027 at the latest.

Bigger rival Texas Instruments Inc said this week it expected demand across most of its end markets to decline, while South Korea’s SK Hynix Inc warned of an “unprecedented deterioration” in memory chip demand.

STMicro said earlier it expected fourth-quarter sales to edge up by 1.8% from the previous quarter to about $4.4 billion. That contrasts with a jump of 12.6% in the three months that ended on Sept. 30.

Co-controlled by the Italian and French governments, STMicro said demand rose across all its products in the third quarter, beating market expectations, with total net revenue reaching 4.32 billion.

Gross margin stood at 47.6% in the third quarter, also above analysts’ average predictions.

STMicro said it now expected full-year net revenue of $16.1 billion, up 26% on the year, as well as a gross margin of about 47.3%, in line with previous guidance.

(Reporting by Mathieu Rosemain; Editing by Simon Cameron-Moore, Clarence Fernandez and Tomasz Janowski)

By Katie Paul and Chavi Mehta

(Reuters) – Facebook parent Meta Platforms Inc on Wednesday forecast a weak holiday quarter and significantly more costs next year, sending shares down nearly 20% as investors voiced skepticism about the company’s pricey metaverse bets.

The forecast knocked about $67 billion off Meta’s stock market value in extended trade, adding to the more than half a trillion dollars in value already lost this year.

If Meta’s after-hours stock rout is matched in Thursday’s trading session, it will have been its deepest one-day loss since Feb. 2, when the company last issued a dismal forecast.

The disappointing outlook comes as Meta is contending with slowing global economic growth, competition from TikTok, privacy changes from Apple, concerns about massive spending on the metaverse and the ever-present threat of regulation.

Executives announced plans to consolidate offices and said Meta would keep headcount flat through the end of 2023.

Revenue fell 4% in the third quarter ended Sept. 30. That deepened a revenue decline begun the previous quarter, when the company posted a first-ever revenue drop of 0.9%, although it was less steep than the 5.6% decline Wall Street had expected, according to IBES data from Refinitiv.

GRAPHIC: Meta’s revenue fell for a second straight quarter https://graphics.reuters.com/METAPLATFORMS-RESULTS/dwvkrbbwbpm/chart.png

More troubling was the company’s estimate that fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, mostly under analysts’ estimates of $32.2 billion, according to the Refinitiv data.

Meta also forecast that its full-year 2023 total expenses would be $96 billion to $101 billion, significantly higher than a revised estimate for 2022 total expenses of $85 billion to $87 billion.

That includes an estimated $2.9 billion in charges over the course of both 2022 and 2023 from the office downsizing.

It also forecast that operating losses associated with the Reality Labs unit responsible for its metaverse investments would grow in 2023 and pledged to “pace” investments after that.

Total costs for the third quarter came in above estimates at $22.1 billion, compared with $18.6 billion the year prior.

‘EXPERIMENTAL BETS’

Meta is carrying out several overhauls of its apps and ads products to keep its core business pumping out profits, while also investing $10 billion a year in a bet on metaverse hardware and software.

Chief Executive Mark Zuckerberg has said he expects the metaverse investments to take about a decade to bear fruit. In the meantime, he has had to freeze hiring, shutter projects and reorganize teams to trim costs.

An analyst on the investor call told Zuckerberg investors were worried that the company had taken on “just too many experimental bets” and asked the chief executive why he believed his gambles would pay off.

Meta executives defended the spending, saying most of the company’s expenses were still going toward the core business, including investments in more expensive AI-related servers, infrastructure and data centers.

Zuckerberg added that he expected the metaverse work to provide returns over time.

“I appreciate the patience,” he said. “And I think that those who are patient and invest with us will end up being rewarded.”

Zuckerberg said plays of Meta’s TikTok-like short-video product Reels now number more than 140 billion across Facebook and Instagram each day, up 50% from six months ago, and its revenue run rates are now $3 billion annually.

He believes Reels is gaining against rival TikTok, he added, with Reels being reshared more than 1 billion times a day.

Meta also posted user growth figures roughly in line with expectations, including a year-over-year increase of monthly active users on flagship app Facebook.

“The worry for Meta is that this pain is likely to continue into 2023 as cost headwinds remain a real challenge and the strong dollar impacts on overseas earnings,” said Ben Barringer, equity research analyst at Quilter Cheviot.

“Given revenues were down at a time when costs have grown significantly, modest user growth and impressions simply isn’t going to bail you out.”

Net income in the third quarter fell to $4.40 billion, or $1.64 per share, from $9.19 billion, or $3.22 per share, a year earlier, its worst showing since 2019 and the fourth straight quarter of profit decline.

Analysts had expected a profit of $1.86 per share.

(Reporting by Katie Paul in Palo Alto, Calif. and Chavi Mehta in Bengaluru; Additional reporting by Sheila Dang in Dallas; Editing by Anil D’Silva, Peter Henderson and Lisa Shumaker)

By Chen Lin

SINGAPORE (Reuters) – Southeast Asia’s internet economy is expected to be worth $330 billion by 2025, though this a downgrade from a previous forecast due to economic uncertainty and more pressure on tech companies to make a profit, an industry report said on Thursday.

The annual report, by Alphabet’s Google, Singapore state investor Temasek Holdings and global business consultants Bain & Company, trimmed its forecast for 2025 from $363 billion in last year’s report.

“Amidst global macroeconomic headwinds, reduced disposable income, sky-rocketing prices, and lower product availability, there is tapering of demand from Southeast Asia consumers,” the trio said in a joint release.

The region of 11 countries is one of the world’s fastest growing internet markets, due to a young population, widespread smartphone usage and urbanisation, and a growing middle class.

The report, which covers Indonesia, Thailand, Vietnam, Singapore, Malaysia, and the Philippines, is still upbeat on this year and sees the internet economy growing 20% to $200 billion, three years earlier than anticipated in an inaugural report in 2016.

All six countries are expected to post double-digit growth between now and 2025, with Vietnam having the fastest growing digital economy this year at 28%.

Indonesia, the region’s most populous nation, saw its digital economy grow 22% to $77 billion this year, contributing to about 40% of Southeast Asia’s total online spending.

On the tech investment front, while early-stage deals are continuing with strong momentum, late-stage deals are seeing “more pronounced dips” and a pause in plans to go public.

Global investors are getting increasingly cautious amid rising interest rates and plummeting stock valuations, the report said, with initial public offering prospects set to grind to a near halt for the next 12 to 18 months.

The digital financial services sector is expected to overtake e-commerce to become the region’s top investment sector, with payments taking up the majority share of the deals.

In the first half of 2022, the sector saw a record funding of around $4 billion.

Meanwhile, Vietnam, Indonesia and Philippines are likely to attract more investors in the longer-term, the report said.

“Universally investors generally expect deal activity to recover from 2024 onwards,” said Fock Wai Hoong, Deputy Head of Technology & Consumer and Southeast Asia at Temasek.

Venture capitalists had $15 billion on hand to sustain deals at year-end 2021, the report said.

(Reporting by Chen Lin in Singapore; Editing by Ed Davies)

BEIJING (Reuters) – China’s economy is facing growing risks of slowing external demand in the fourth quarter, a commerce ministry spokesperson said on Thursday, adding that uncertainties were overshadowing growth in China’s foreign trade.

As the world economy loses momentum, the environment for trade was getting increasingly complex for China, commerce ministry spokesperson Shu Jueting told a regular news conference.

“Looking into the fourth quarter, the risk of slowing external demand is expected to increase,” she said.

China’s exports grew 5.7% from a year earlier in September, the slowest pace since April. Imports rose a feeble 0.3%, undershooting estimates for 1.0% growth.

It comes as monetary tightening across the world to contain red-hot inflation is curbing global economic growth.

Despite the challenges, conditions were still favourable for a stable growth in trade between China and other countries, Shu added.

Beijing’s stringent zero-COVID strategy has also squeezed sectors that are particularly sensitive to pandemic restrictions such as services.

“The consumption market continues a recovery and growth trend, but due to unexpected factors including the COVID outbreaks, market entities in sectors of brick and mortar retail, catering and accommodation still face huge pressure,” Shu said.

She expected consumption to rebound as policy support takes effect.

China’s retail sales, an indicator of consumption, grew 2.5% last month, missing forecasts for a 3.3% increase and easing from August’s 5.4% pace, underlining still fragile domestic demand.

Even if the economy rebounds at a faster-than-anticipated clip in the third quarter, a long-term recovery will be challenged by persistent COVID-19 curbs, a prolonged property slump and global recession risks, economists say.

A Reuters poll forecast China’s growth to slow to 3.2% in 2022, far below the official target of around 5.5%, marking one of the worst performances in almost half a century.

(Reporting by Ellen Zhang, Liangping Gao and Ryan Woo; editing by John Stonestreet and Ana Nicolaci da Costa)

By Brendan Pierson

(Reuters) – TikTok Inc won dismissal of a lawsuit accusing it of causing the death of a 10-year-old girl by promoting a deadly “blackout challenge” that encouraged people to choke themselves on its video-based social media platform.

U.S. District Judge Paul Diamond in Philadelphia ruled Tuesday that the company was immune from the lawsuit under a part of the federal Communications Decency Act that shields publishers of others’ work.

“The wisdom of conferring such immunity is something properly taken up with Congress, not the courts,” Diamond wrote.

Jeffrey Goodman, a lawyer for the girl’s mother, Tawainna Anderson, said in a statement that the family would “continue to fight to make social media safe so that no other child is killed by the reckless behavior of the social media industry.”

TikTok did not immediately respond to a request for comment.

Anderson sued TikTok and its Chinese parent company ByteDance Inc in May, saying the company’s algorithm showed her daughter, Nylah Anderson, a video suggesting the blackout challenge.

In December 2021, Nylah attempted the blackout challenge using a purse strap hung in her mother’s closet, losing consciousness and suffering severe injuries, according to the lawsuit. She was rushed to a hospital but died five days later.

TikTok and ByteDance moved to dismiss the case, saying that under Section 230 of the Communications Decency Act, they could not be held liable for publishing third-party content. Diamond, while saying that the circumstances were “tragic,” agreed.

TikTok and other social media companies, including Facebook and Instagram parent Meta Platforms Inc and YouTube parent Alphabet Inc, are facing a growing number of lawsuits around the country seeking to hold them liable for causing young people to become addicted to their products, and in some cases causing harm including eating disorders, self-injury and suicide.

A federal judicial panel earlier this month consolidated dozens of such cases in a new mass tort in a federal court in Oakland, California.

(Reporting By Brendan Pierson in New York; editing by Jonathan Oatis)

By Dagmarah Mackos

(Reuters) -French IT consulting group Capgemini sees demand slowing in 2023 but expects results at the top end of guidance this year driven by its cloud, data and artificial intelligence businesses.

“The group expects demand to decelerate a bit in the coming quarters, but it remains confident that 2023 will be a year of growth, even if probably not as strong as in 2022,” Chief Executive Aiman Ezzat said on a media call on Thursday.

His comments come amid growing fears that an economic slowdown could dent IT budgets after gloomy results from tech giants Alphabet Inc and Microsoft Corp.

The company has forecast revenue growth in 2022 of between 14% and 15% on a constant currency basis and an operating margin of 12.9% to 13.1%, which analysts said could be seen as conservative given healthy demand.

Capgemini shares were down more than 2% at 0727 GMT.

The company estimates growth in the fourth quarter at around 10%, chief financial officer Carole Ferrand said on the call.

The group reported third-quarter revenue of 5.55 billion euros ($15.8 billion), up 15.7% from the same period a year earlier at constant exchange rates. Bookings in the quarter rose 13% to 5.43 billion euros.

“Given this very good Q3 performance, we now feel comfortable with the top end of our growth outlook for

2022,” Ezzat said in the company’s statement.

It expanded its workforce 16% year on year, reaching headcount of 358,400 at the end of September.

The group also said it will hire less as growth slows and attrition rate moderates in a stabilising talent market.

The high demand for IT specialists due to a shortage of available workers has forced many companies to increase wages to attract new talent in a competitive market.

($1 = 0.9936 euros)

(Reporting by Dagmarah Mackos; Editing by Josephine Mason, Edwina Gibbs and Jane Merriman)

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – Samsung Electronics said on Thursday its supply of memory chips will grow faster than its peers and its investments will proceed as planned, bucking the broader industry move to scale back output and spending amid growing recession fears.

Samsung’s apparent confidence indicates it intends to use a sharp and sudden downturn in worldwide tech demand to consolidate its dominance in memory chips and catch up with bigger rival TSMC in contract chip manufacturing, analysts said.

The South Korean firm also said on Thursday its de facto leader Jay Y. Lee, who it says was behind its decision to make aggressive investments in contract chipmaking, was appointed as executive chairman.

“We are not considering an artificial production cut,” Han Jin-man, executive vice president of memory business at Samsung, told analysts after posting a 31% plunge in quarterly profit.

“Market demand has contracted right now, but … we need to prepare for mid- to long-term demand recovery.”

Samsung said it did not expect much change to its 2023 memory chip investment plans, in contrast to smaller rival SK Hynix, which on Wednesday warned of an “unprecedented deterioration” in memory chip demand and slashed 2023 investment by more than 50%.

Earlier this month TSMC also cut its annual investment budget by at least 10% for 2022 and struck a more cautious note than usual on upcoming demand. Samsung plans to invest 54 trillion won this year, of which 47.7 trillion won ($34 billion)is earmarked for its components business, mainly semiconductors.

Samsung said geopolitical uncertainties were likely to dampen demand for semiconductors until early 2023. For NAND flash chips, Samsung forecast the market may not recover in 2023.

Even so, it said it would boost shipments of memory chips at a faster rate than its peers across the industry. Samsung does not publish specific details of its supply plans.

In the contract chip business, where Samsung is a distant No.2 behind TSMC, it expected record sales and operating profit this year.

“Samsung seems to be saying it will use this downcycle to push out other NAND flash firms like SK Hynix and Kioxia,” said Park Sung-soon, analyst at Cape Investment & Securities.

Shares in Samsung closed up 0.2% in afternoon trade, but SK Hynix shares tumbled 4.2%. The wider market was up 1.7%.

ECONOMIES OF SCALE

Although Samsung’s fourth-quarter earnings are expected to dip further as memory chip prices continue to fall, Samsung will be better able to defend profits than peers due to economies of scale, analysts said.

Samsung is expected to keep capital expenditure cuts to a minimum in 2023 versus 2022 – at about 5% for memory chips – to continue its migration into more advanced manufacturing, which will initially curtail supplies of certain chips due to new production process, said Daishin Securities analyst Wi Min-bok.

This differs from rivals SK Hynix or Micron Technology’s plan to potentially cut investment by more than 30% next year.

Samsung’s operating profit fell to 10.85 trillion won ($7.7 billion) for the July-September quarter, from 15.8 trillion won a year earlier, the first year-on-year decline in nearly three years as its chip business profit fell to 5.12 trillion won from 10.07 trillion won a year earlier.

That was in line with Samsung’s own estimate of 10.8 trillion won earlier this month. Revenue rose 4% to 76.8 trillion won.

Samsung said profit in its mobile business fell slightly to 3.24 trillion won from 3.36 trillion won a year earlier, as a market downturn was offset by firmer demand for high-end smartphones and newly launched wearables.

Samsung forecast 2023 mobile demand could recover slightly from 2022, and said it planned to focus on its flagship and foldable smartphones to harness comparatively robust appetite for premium products.

($1 = 1,416.8000 won)

(Reporting by Joyce Lee and Heekyong Yang; Editing by Miyoung Kim and Stephen Coates)

By Cynthia Kim

SEOUL (Reuters) – South Korea’s central bank announced more measures on Thursday to improve liquidity in the banking system and mitigate the fallout from a developer’s debt default which is sparking fears of a credit crunch in Asia’s fourth-largest economy.

Gangwon Jungdo Development Corp., the developer of the new Legoland Korea theme park two hours east of Seoul, missed bond payments worth 205 billion won ($144 million) due on Sept. 29.

The news shocked some investors given that the debts, asset-backed commercial paper guaranteed by the local government, were then rated A1. About 10 local brokerages are among the debt holders.

The default has led to a sudden freezing of short-term money markets in the country just as the Bank of Korea’s 250 basis points worth of rate hikes since mid-last year are battering the once-booming property market. Local brokerages are also heavily exposed to real estate project finances.

Growing signs that Korean companies are having trouble obtaining financing come against the backdrop of volatile global financial markets and China’s property market crisis, something the BOK will need to consider as analysts expect policy rates to rise further to 3.50% or 3.75% by next year.

Data earlier on Thursday showed South Korea’s economic growth fell to its slowest in a year in the third quarter.

Policymakers have announced a flurry of measures since Sunday to inject more money into the financial system, including the doubling of a corporate bond-buying facility to 16 trillion won.

That was part of a 50 trillion won package to prop up credit markets, which focused on buying commercial paper and other debt issued by financial institutions.

On Thursday, the BOK said it will loosen collateral policies for local financial institutions applying for loans from the bank.

The bank will also open a temporary repurchase agreement facility worth about 6 trillion won ($4.24 billion) for local financial institutions to support the smooth functioning of financial markets.

The measures come as the yield on 91-day commercial paper surged to 13-year high of 4.55% on Thursday from 1.55% at the start of the year. The country’s benchmark share index has been little fazed by the default news.

The theme park opened in May.

Caught off-guard by the default, even corporate bond sales by AAA rated state-run Korea Electric Power Corp. failed to get enough bidders on Tuesday.

“The Legoland issue has really triggered worries about a credit crunch and more are also worried about financial conditions at some brokerages and construction firms,” said Han Kwang-yeol, an analyst at NH Investment & Securities.

“The recovery of this credit market will be a slow one given that central banks all around the world are still hiking rates to curb inflation.”

To ease the market jitters, Gangwon Province, which is obligated to repay the loan as state guarantor of GJC’s debt, said on Thursday it will fully pay the entire 205 billion won by Dec. 15.

“The decision (to repay the debt) has been coordinated with the government including the Ministry of Economy and Finance,” said Jeong Kwang-yeol, deputy governor on economic affairs for Gangwon Province.

Lee Bok-hyun, the governor of the Financial Supervisory Service, separately said he expects market nerves to ease by next week.

“Today we saw Gangwon Provice’s detailed debt repayment plans regarding Legoland.. After the weekend, market sentiment will improve,” Lee told reporters in Incheon, Yonhap News reported.

($1 = 1,422.7300 won)

(Reporting by Cynthia Kim; Editing by Christian Schmollinger, Ana Nicolaci da Costa and Kim Coghill)