March CP Issuance Scale 21.2 Trillion Won... 34% Increase from Previous Month

[Asia Economy Reporter Oh Ju-yeon] In March, the issuance amount of Commercial Paper (CP) increased by 34% compared to the previous month.

According to the Securities Information Portal Saybro of the Korea Securities Depository on the 9th, the issuance amount of CP by domestic companies last month was 21.2472 trillion KRW, up 34.16% from 15.8375 trillion KRW in the previous month.

By industry, the issuance amount by securities firms increased significantly.

Last month, Shinhan Financial Investment's CP issuance amount was 1.3 trillion KRW, the highest among domestic companies. This is 26 times the issuance amount of 50 billion KRW in the previous month. Following were Korea Investment & Securities (1.01 trillion KRW), Mirae Asset Daewoo (1 trillion KRW), Hana Financial Investment (605 billion KRW), and Samsung Securities (370 billion KRW).

As concerns over liquidity crunch due to the novel coronavirus infection (COVID-19) grew, securities firms are interpreted to have proactively secured funds through CP issuance. In some securities firms, a massive number of margin calls occurred as the underlying indices of overseas Equity-Linked Securities (ELS) plummeted, which also had an impact.

As a result, there is a movement to downgrade the credit ratings of domestic securities firms. On the previous day, the credit rating agency Moody's announced that it has placed six domestic securities firms including KB Securities (A3), Korea Investment & Securities (Baa2), Mirae Asset Daewoo (Baa2), NH Investment & Securities (Baa1), Samsung Securities (Baa2), and Shinhan Financial Investment (A3) under review for possible credit rating downgrade.

This is based on the analysis that the volatility expansion in global and domestic financial markets due to the spread of COVID-19 will pressure the profitability, capital adequacy, funding, and liquidity of securities firms.

Among general companies, CP issuance by oil refiners increased significantly. This is because demand for jet fuel and crude oil has been sluggish due to the COVID-19 impact, and refining margins are expected to worsen due to the sharp drop in crude oil prices. Last month, SK Energy and Hyundai Oilbank's issuance amounts reached 875 billion KRW and 780 billion KRW respectively, increasing by 236.54% and 73.33% compared to the previous month.

This content was produced with the assistance of AI translation services.