Stock and Corporate Bond Issuance Slightly Increased in the First Half Despite COVID-19

[Asia Economy Reporter Eunmo Koo] Despite the impact of the novel coronavirus disease (COVID-19), the direct financing performance of domestic companies in the first half of this year showed a slight improvement overall, as corporate bond issuance increased even though stock issuance decreased.

According to the Financial Supervisory Service on the 29th, the total issuance of stocks and corporate bonds by domestic companies through public offerings in the first half of this year amounted to KRW 91.5122 trillion (stocks KRW 2.153 trillion, corporate bonds KRW 89.3592 trillion), an increase of KRW 3.1946 trillion (3.6%) compared to the same period last year.

First, stock issuance recorded KRW 2.153 trillion, down KRW 67.1 billion (3.0%) from KRW 2.2201 trillion in the same period last year, as the increase in initial public offerings (IPOs) was offset by a decrease in paid-in capital increases. IPOs increased in scale with the listing of the major company SK Biopharm (KRW 652.3 billion) on the KOSPI market, totaling 24 cases and KRW 1.0693 trillion, up KRW 234.5 billion (28.1%) from last year (29 cases, KRW 834.8 billion).

On the other hand, paid-in capital increases amounted to KRW 1.0837 trillion (14 cases), down KRW 301.6 billion (21.8%) from the same period last year (20 cases, KRW 1.3853 trillion). This is interpreted as a base effect following large-scale paid-in capital increases by some major companies last year aimed at improving financial structures.

Corporate bonds recorded KRW 89.3592 trillion, up KRW 3.2617 trillion (3.8%) from KRW 86.0975 trillion in the first half of last year, as issuance of general corporate bonds and asset-backed securities (ABS) increased despite a decrease in financial bonds issuance.

General corporate bonds amounted to KRW 27.772 trillion (256 cases), up KRW 2.08 trillion (7.8%) from KRW 25.7712 trillion (247 cases) in the same period last year. Compared to the first half of last year, the proportion of bonds issued for debt repayment increased, while the proportion of long-term bonds with maturities over five years decreased. Notably, the issuance proportion of bonds rated 'A' or below decreased by 11.0 percentage points compared to the previous year.

ABS issuance also increased by KRW 2.2263 trillion (30.9%) to KRW 9.4343 trillion (462 cases) from KRW 7.208 trillion last year. Primary collateralized bond obligations (P-CBO) issuance rose sharply to KRW 2.88 trillion, up KRW 1.6855 trillion (141.1%) from KRW 1.1945 trillion the previous year.

Meanwhile, financial bonds raised KRW 52.1529 trillion (887 cases), down KRW 965.4 billion (1.8%) from KRW 53.1183 trillion in the same period last year. During this period, financial holding company bonds increased by KRW 2.45 trillion (71.0%) to KRW 5.9 trillion, bank bonds decreased by KRW 6.814 trillion (30.0%) to KRW 14.1779 trillion, and other financial bonds increased by KRW 2.666 trillion to KRW 32.075 trillion.

The outstanding balance of corporate bonds as of the end of the first half reached KRW 546.288 trillion, expanding by KRW 43.227 trillion (8.6%) compared to June last year. While the net issuance trend of general corporate bonds was maintained, its scale was reduced.

Commercial paper (CP) and short-term bond issuance totaled KRW 677.5738 trillion, down KRW 17.6224 trillion (2.5%) from KRW 695.1962 trillion in the same period last year. CP issuance amounted to KRW 163.0409 trillion, decreasing by KRW 8.2816 trillion (4.8%) from the previous year, and short-term bonds also shrank by KRW 9.3408 trillion (10.0%) to KRW 514.5329 trillion.

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