Korea Inc. rushes to booming local corporate bond market

South Korean companies are rushing to raise money in the local corporate bond market, which is unusually buoyant at year's end amid expectations of interest rate cuts in 2025 as uncertainties over the US presidential election dissipate.

Hanwha Ocean Co., the country’s third-largest shipbuilder, plans a bookbuilding session this Tuesday to sell 50 billion won ($35.8 million) in corporate bonds, including 20 billion won in notes with a one and a half year maturity and 30 billion won with a two-year maturity, to repay maturing commercial papers, according to investment banking industry sources.

The company, rated at BBB+ by local credit ratings agencies, is set to increase the sale to up to 100 billion won in response to demand, the sources said.

Hanwha – formerly Daewoo Shipbuilding & Marine Engineering Co. – last issued corporate bonds nine years ago.

The A-rated HS Hyosung Advanced Materials plans to sell 120 billion won in corporate bonds on Nov. 27, its first debt issuance in three years.

Last month, Pan Ocean Co. and HK inno.N Corp., both rated at A, successfully sold out their corporate bonds during bookbuilding sessions.

INFLOWS ON RATE CUT EXPECTATIONS

The domestic corporate bond market is enjoying sustained inflows, industry sources said.

“Investors continued to expect rate cuts next year,” said Kim Eun-ki, an analyst at Samsung Securities Co. “We may not see the seasonal year-end weakness this year because the bond market has not suffered major outflows.”

The corporate bond market typically contracts in November and December as institutional investors close their books, drying up liquidity.

The credit spread – the difference in yield between two debt securities of the same maturity but different credit quality – narrowed as the market defied the trend.

The yield spread between the highly liquid Korean government’s three-year bond and non-guaranteed corporate notes rated AA- narrowed to 56 basis points (bps) on Monday from 75 bps earlier this year.

That indicated an improvement in investor sentiment on local corporate bonds, industry sources said.

Write to Hyun-Ju Jang at blacksea@hankyung.com
 
Jongwoo Cheon edited this article.