This Year’s Global Corporate Financing Hits Record $12.1 Trillion Amid 'Low Interest Rates + Wild Impulses'

25% Increase Compared to Pre-COVID-19... Lower Cost Burden Due to Low-Interest Rate Policy

[Asia Economy Reporter Byunghee Park] Major foreign media reported on the 28th (local time) that the scale of funds raised by companies this year through stock and bond issuance, loan contracts, and other means reached $12.1 trillion (approximately 1,137.5 trillion KRW).

This represents a 17% increase compared to last year and about a 25% rise compared to 2019, before the COVID-19 pandemic, marking an all-time high.

The fundamental reason is that after the COVID-19 pandemic, central banks' low-interest-rate policies made corporate financing costs inexpensive. Additionally, investors' irrational investments, known as "animal spirits," were added due to a faster-than-expected economic recovery.

Chris Blum, an analyst at BNP Paribas, said, "It was a blockbuster year," and added, "We expect large-scale fundraising to continue next year." He further noted, "Contrary to most expectations that the market would calm down after this frenzy, the boom is continuing."

The scale of corporate bond issuance was about $5.5 trillion, down about 3% from last year. However, junk-rated (non-investment grade) companies actively issued bonds taking advantage of low interest rates. The issuance of junk-rated corporate bonds increased by 17% compared to last year, reaching $650 billion. The size of leveraged loans also more than doubled, totaling $614 billion. Leveraged loans refer to loan bonds where companies with low credit ratings borrow money from banks using assets as collateral.

The scale of fundraising through new stock issuance was $1.44 trillion, a 24% increase from the previous year. In particular, in the United States, for the first time ever, the scale of companies going public through Special Purpose Acquisition Companies (SPACs) surpassed that of traditional Initial Public Offerings (IPOs).

However, the performance of newly listed companies was not good. The Renaissance IPO Index, which reflects the stock price trends of companies newly listed on the New York Stock Exchange, fell 8% this year. Its relative return compared to the S&P 500 Index recorded the worst performance since the Renaissance IPO Index was established in 2009.

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