The domestic corporate bond market is increasingly polarizing with investors preferring safer AAA bonds and bank debentures.
According to the Financial Supervisory Service, the amount of direct financing in the market totaled 9.2974 trillion won in January, edging down from 9.3939 trillion won of a month ago. Still, the issue of bank debentures and corporate bonds with a credit rating of at least AAA showed a significant increase. Specifically, 8.7274 trillion won was financed by means of corporate bond issue and a portion equivalent to 1.45 trillion won was made up of those with the higher ratings while they had taken up approximately 500 billion won in January last year. Compared to the previous months, the issue of AA- and A-rated corporate bonds decreased 20.4% and 50.5%, respectively.
The corporate bond-based financing was led by large corporations with higher credit ratings. The issue of corporate bonds by large corporations increased by 10.2% from 3.19 trillion won to 3.515 trillion won between January 2015 and January 2016 and by 85.8% from 1.892 trillion won compared to December last year. Meanwhile, the issue of corporate bonds by small and medium enterprises edged up from 12 billion won to 15 billion won between December 2015 and January 2016.
Under the circumstances, the issue of BBB- and lower-rated bonds stood at five cases worth 90 billion won. In addition, the issue amount exceeded the redemption in January unlike in the previous month. 48.8% (1.715 trillion won) of the general corporate bonds issued were for refinancing, 47.2% (1.6579 trillion won) were for operating funds and 4% (142.1 billion won) were for facility funds. Financial bond and ABS issues decreased.
Bond duration is showing some signs of change, too. Although mid-term bonds with a maturity of one to five years were prevalent last year, long-term bonds are becoming the mainstream this year. In the first month of last year, long-term and mid-term bond issues reached 775 billion won and 2.33 trillion won, respectively. Two months ago, however, the respective amounts changed to 2.045 trillion won (58.2%) and 1.47 trillion won (41.8%).
In the meantime, the stock issue amount increased 67.9% from 339.4 billion won to 570 billion won between January 2015 and January this year and decreased 34.4% month on month from 869.4 billion won. The month-on-month decrease was because the number of IPOs stood at five (85.4 billion won) in January this year. The number of paid-in capital increases carried out in that month dropped from 12 to two compared to the preceding month. However, the total issue amount showed a slight increase from 445.7 billion won to 484.6 billion won because of the large-scale capital increase by the BNK Financial Group.