Korean firms' bond sales hit record in Q1 amid rate cut signal

Corporate bond issuance in South Korea hit a record in the first quarter of this year amid growing expectations of the Federal Reserve’s rate cuts and increasing market uncertainties ahead of the country’s general election on April 10.  

Korean companies issued 38.87 trillion won ($28.8 billion) worth of bonds in the January-March period, the largest on record, according to the Korea Exchange on Thursday. The quarterly bond issue increased 17% from a year earlier.

The popularity of corporate bonds continues this month. A total of 10 companies held bookbuildings on April 1 and 2 and saw their debt offerings oversubscribed, with investors betting a combined 8.39 trillion won.

SK Hynix Inc., the world’s second-largest memory chip maker, attracted 2.86 trillion won of subscriptions on April 1 for its 380 billion won of AA-rated bond sales. Energy supplier GS Power Co. and brokerage Kyobo Securities Co. bonds, with AA and AA- ratings, respectively, were oversubscribed more than 10 times earlier this week.

Drugmaker Daewoong Pharmaceutical Co. drew 931 billion won in subscriptions on April 2 for its 100 billion won in A+ bond sales. Electric equipment maker HD Hyundai Electric Co., the bond rating for which jumped from A- to A last month, attracted 557 billion won in subscriptions for a 50 billion won debt offering, including one with a five-year maturity.

Investors also welcomed some companies returning to the bond market after several years.

Lotte Global Logistics Co., which came back to the bond market after three years, drew 259 billion won in subscriptions for raising 50 billion won. Kolon Industries Inc., which plans a bond issue for the first time since June 2021, saw 373 billion won in subscriptions for raising 75 billion won.

Many companies are rushing to bond issues ahead of their bond maturity. This is to navigate market uncertainties before major political events, such as Korea's general election on April 10 and the US presidential election in November, a banking source said.

Among the companies is HD Hyundai Electric, which will use the proceeds to repay loans due in July and December of this year. Daewoong Pharmaceutical plans to repay 90 billion won in debt that matures in July.  

Companies' increased refinancing plans also boosted corporate bond sales. A combined 19.52 billion won worth of bonds matured during the first quarter, up 32.6% from a year ago.  

Experts do not expect a sharp contraction in the corporate bond market after the general election.

“Given the stable money market trend, the election is unlikely to influence bonds with high credit ratings. There may be different impacts to each company based on its fundamentals, rather than caution on the overall market,” said Korea Investment & Securities Co. analyst Kim Ki-myung.

Write to Hyun-Ju Jang at blacksea@hankyung.com


Jihyun Kim edited this article.