Financial Supervisory Service [Yonhap]
Financial Supervisory Service [Yonhap]

South Korean companies pulled back from long-term capital markets in the first half of this year, shifting instead toward short-term funding. Equity and corporate bond issuance shrank more than 15% from a year earlier, while commercial paper and short-term bond issuance jumped 68%. Companies opted for short-term financing over long-term debt amid high interest rates and an uncertain funding environment.

The Financial Supervisory Service's first-half corporate direct financing report, released Tuesday, showed that public issuance of stocks and corporate bonds totaled 126.58 trillion won ($88.3 billion) in the first half of this year, down 23.36 trillion won, or 15.6%, from the same period last year.

Equity issuance fell to 2.98 trillion won, a decline of 1.26 trillion won, or 29.6%. The number of initial public offerings in the first half dropped to 28, down from 42 in the same period last year.

On the KOSPI, only one IPO took place — Kbank, which raised 249 billion won — while Kosdaq saw 27 listings. With activity concentrated in small- and mid-size offerings and the overall deal count falling, first-half IPO proceeds came to 1.01 trillion won, down 435.1 billion won, or 30.0%, from 1.45 trillion won a year earlier.

Rights offerings totaled 23 deals worth 1.96 trillion won, down 820.1 billion won, or 29.5%, from 24 deals worth 2.78 trillion won in the same period last year.

In the first half of last year, five large rights offerings of 100 billion won or more were completed, including Samsung SDI's 1.6 trillion won deal. This year, only two such deals were carried out — SKC at 1.2 trillion won and Lunit at 211.5 billion won — pulling down the overall rights-offering total.

Dual-listing regulations and heightened market volatility discouraged major IPO candidates from proceeding with listings.

Corporate bond issuance fell to 123.6 trillion won, down 22.1 trillion won, or 15.2%, from 145.7 trillion won in the same period last year.

General corporate bonds dropped sharply to 25.91 trillion won, a decline of 11.93 trillion won, or 31.5%, while asset-backed securities also fell to 7.28 trillion won, down 3.2 trillion won, or 30.6%.

Financial bonds slipped to 90.42 trillion won, down 6.97 trillion won, or 7.2%. Financial holding company bonds and bank bonds edged up 3.2% and 0.9%, respectively, but other financial bonds fell 12%, dragging down the overall financial bond total.

Among general corporate bonds, refinancing accounted for the bulk of proceeds at 18.87 trillion won, or 72.9% of the total, followed by operating purposes at 23.6% and facility investment at 3.6%. Investment-grade bonds rated AA or above dominated issuance at 19.61 trillion won, or 76.9% of the total, while bonds rated BBB or below made up just 2.2% — a sign of deepening polarization in the credit market. The outstanding corporate bond balance stood at 757.24 trillion won at the end of the first half, up 37.02 trillion won, or 5.1%, from a year earlier.

While the long-term market contracted, the short-term money market moved in the opposite direction. Commercial paper and short-term bond issuance totaled 1,272.85 trillion won in the first half, surging 515.11 trillion won, or 68.0%, from 757.74 trillion won in the same period last year.

CP issuance rose to 282.75 trillion won, up 45.08 trillion won, or 19.0%, with general CP, project financing asset-backed CP and other asset-backed CP all posting gains. The outstanding CP balance grew to 241.49 trillion won, up 25.52 trillion won, or 11.8%, from the end of the first half last year.

Short-term bond issuance surged to 990.09 trillion won, up 470.03 trillion won, or 90.4%, from a year earlier. General short-term bonds led the increase, soaring 121.1% to 441.94 trillion won, while project financing asset-backed short-term bonds rose 25.0% and other asset-backed short-term bonds climbed 11.7%. The outstanding short-term bond balance at the end of the first half reached 111.23 trillion won, up 39.2% from 79.27 trillion won a year earlier.


jiyun@heraldcorp.com