South Korean companies reduced stock issuance sharply while increasing bond offerings in the first half of this year.
The Financial Supervisory Service (FSS) announced on July 31 that stock issuance shrank 61 percent on year to 2.22 trillion won (US$1.87 billion) in the first six months.
By type, initial public offerings (IPOs) jumped 52.8 percent to 834.80 billion won (US$702.99 million), while secondary offerings plunged 73.1 percent to 1.39 trillion won (US$1.17 billion).
The number of IPO cases totaled 29 during the period, up seven from the same period last year. The total broke down into two on the main stock index KOSPI and the remaining 27 on the secondary KOSDAQ. The number of companies issuing new shares decreased 14 on year to total 20 amid the country’s lackluster stock market.
On the other hand, domestic companies sold a total of 96.10 trillion won (US$80.92 billion) worth of debt in the cited period, up 5.5 percent from the same period a year ago.
The FSS said, “The size of stock issuance marked a sharp drop due to a base effect. Conglomerates carried out large-scale capital increases in the first half of last year to improve their financial structure. A year ago, Samsung Heavy Industries, Hyundai Heavy Industries and Mirae Asset Daewoo raised 1.40 trillion won (US$1.17 billion), 1.20 trillion won (US$1.01 billion), and 700 billion won (US$589.47 million), respectively, via new share sales.”
Corporate bond issuance by ordinary companies came to 25.77 trillion won (US$21.70 billion), up 24.1 percent on year, while financial bond issuance by financial institutions increased 0.8 percent to 53.12 trillion won (US$44.73 billion). In contrast, asset-backed securities (ABS) issuance fell 11.2 percent to 7.21 trillion won (US$6.07 billion).
Bond issuance, mainly ordinary corporate bonds, grew as companies took advantage of the favorable issuance environment created by low interest rates. Outstanding balance in corporate debt stretched to 503.06 trillion won (US$423.63 billion) as of the end of June, up 8.6 percent from a year earlier.
Commercial papers issued from January to June rose 3.0 percent to 171.32 trillion won (US$144.27 billion), whereas short-term bonds issuance declined 8.8 percent to 523.87 trillion won (US$441.16 billion).