Corporate direct financing in S.Korea reduces on lower equity sales

Corporate direct financing, including bond and stock sales, in South Korea reduced in May as lack of demand for corporate bond and equity issuances, financial watchdog data showed Tuesday.

Corporate debt financing, including debt and equity funding, reached 10.74 trillion won (10.54 billion U.S. dollars) in May, down 3.4 percent from a month earlier, according to the Financial Supervisory Service (FSS).

It was attributable to a drop in rights offering and corporate bond sales by industrial companies, the FSS said.

Equity financing such as rights offering and initial public offering (IPO) plunged to 119.8 billion won in May from 487.2 billion won in April.

There was no company issuing shares last month in the main bourse KOSPI, with four rights offering made in the tech-heavy KOSDAQ market. There was only one IPO worth 16.3 billion won last month.

Debt financing, including sales of corporate bonds, bank debentures and asset-backed securities (ABS), stood at 10.62 trillion won in May, almost unchanged from 10.63 trillion won a month earlier.

Corporate bond sales tumbled 28.2 percent in May from a month earlier, but those for ABS and bank debentures surged 31.9 percent and 27.2 percent respectively.

Bipolarization in the corporate bond market lasted. There was no debt issuance by small firms, but 33 large firms with high credit ratings sold bonds worth 3.53 trillion won in May.