South Korea Ranks 2nd in Asia in Amount of Foreign Currency Bonds

The amount of foreign currency bonds issued by South Korea is the second largest following China among East Asian countries, and the Asian Development Bank (ADB) warned that it would harm South Korea if U.S. interest rates rise.

At the Asia Bond Monitor seminar co-hosted with the Korea Center for International Finance, ADB said, “South Korea's amount of issuing foreign currency bonds such as dollars, euros, and yen is US$26.3 billion as of September, which is the second-largest amount among East Asian countries following China (US$66 billion).” Also, it pointed out that “Companies which issued foreign currency bonds will go through hardships in repayment owing to a strong dollar following the U.S. interest rate increase.”

For example, when the due date arrives for companies that issue U.S. bonds and do business with won exchanged from the bonds, the actual debt amount may increase if the dollar becomes strong, because they must repay the capital by exchanging the bonds back into U.S. dollars.

Iwan Azis, general director of the Office of Regional Economic Integration at ADB, said, “The amount of foreigners investing in Asian bonds has expanded,” expressing a concern by adding, “The flow of Asian bond investors will change at any time if the trend of the U.S. interest rate increase and a strong dollar continues.”