"Corporate Bonds Over Stocks"... Companies' Direct Financing Rises More Than 70%

September Direct Financing by Domestic Companies
Funds Raised Surged to 28 Trillion Won
Corporate Bond Issuance More Than Doubled

Direct financing by domestic companies rose by more than 70% month over month in September. Although the volume of stock issuance fell as paid-in capital increases declined, corporate bond issuance increased sharply.

According to the Financial Supervisory Service on October 26, total public offering issuance amounted to 28 trillion 557.8 billion won in September, up 74.9% from the previous month.

Corporate bonds drove the increase in total public offering issuance. Issuance rose 77.5% over the same period, from 12 trillion 296.3 billion won to 28 trillion 172.5 billion won. Within that total, general corporate bond issuance increased from 310 billion won to 1 trillion 729 billion won. By use of proceeds, 1 trillion 179.9 billion won (68.2%) was issued for refinancing, 499.1 billion won (28.9%) for operations, and 50 billion won (2.9%) for facilities. By credit rating, 920 billion won (53.2%) was issued in high-grade bonds rated AA or above, and 809 billion won (46.8%) in A-rated bonds. By maturity, medium-term bonds accounted for 1 trillion 609 billion won (93.1%), while short-term bonds accounted for 120 billion won (6.9%).

Financial bond issuance rose from 14 trillion 813.8 billion won in August to 25 trillion 798.4 billion won in September. By type, 1 trillion 550 billion won in financial holding company bonds, 11 trillion 573.2 billion won in bank bonds, and 12 trillion 675.2 billion won in other financial bonds were issued.

Issuance of asset-backed securities (ABS) fell over the same period, from 752.4 billion won to 645.1 billion won. However, issuance of primary collateralized bond obligations (P-CBOs), a type of ABS, increased to 356.1 billion won from 264.7 billion won in the previous month. By asset holder, issuance by financial companies increased by 184.7 billion won from the previous month, while issuance by general companies decreased by 292 billion won.

While total corporate bond issuance increased, public offering stock issuance declined. Public offering stock issuance totaled 385.3 billion won in September, down 15.3% from 454.9 billion won in the previous month. Over the same period, the size of initial public offerings (IPOs) increased from 160.6 billion won to 215.6 billion won, but paid-in capital increases plunged from 294.3 billion won to 169.7 billion won.

Meanwhile, issuance of commercial paper (CP) and short-term bonds totaled 183 trillion 330.9 billion won in September, up 23.0% from 149 trillion 69.2 billion won in the previous month. CP and short-term bond issuance amounted to 56 trillion 436.4 billion won and 126 trillion 894.5 billion won, respectively. The outstanding balance of CP fell by 4 trillion 997 billion won from the previous month to 246 trillion 800 billion won in September. By contrast, the outstanding balance of short-term bonds rose by 933 billion won over the same period to 96 trillion 123.5 billion won.

This content was produced with the assistance of AI translation services.