South Korean companies sell more bonds on less borrowing costs

GMT 21:00 2015 Wednesday ,22 July

Arab Today, arab today South Korean companies sell more bonds on less borrowing costs

South Korean companies
Seoul - XINHUA

South Korean companies sold more bonds in the first half than a year earlier amid less borrowing costs caused by the central bank's policy rate cut to an all-time low, financial watchdog data showed Wednesday.

Corporate direct financing, including sales of bonds and stocks, reached 65.73 trillion won (57 billion U.S. dollars) in the first half of this year, up 13 percent from a year earlier, according to the Financial Supervisory Service (FSS).

Rights offering of stocks reduced on the back of the bearish stock move, but corporate bond sales jumped as the borrowing costs declined after the Bank of Korea (BOK) cut its policy rate to an all-time low of 1.5 percent.

The BOK lowered the benchmark interest rate by 25 basis points in March and June each to boost the lackluster South Korean economy hit hard by the outbreak of Middle East Respiratory Syndrome (MERS) and the long spell of dry weather. The bank cut the rate by a quarter percentage point in August and October last year.

Stock sales tumbled 23.9 percent in the first half from a year earlier. The number of companies going public rose to seven to 36, but rights offering plunged 38.1 percent.

Corporate bond issuance increased 15 percent from a year earlier to 63.49 trillion won in the first half. Large firms accounted for the vast majority of the sales, indicating the remaining bipolarization in the debt financing market.

Almost 60 percent of funds, raised through bond sales, were used for business activities, with 32 percent raised to refinance existing debts. Only 9.5 percent of the funds were used for facility investment.

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