Korean brokerage major to up bond rescue program to $1.5 bn

[Provided by Maekyung Media Group]

Nine securities majors of South Korea have agreed to extend the ceiling of a fund to aid liquidity woes of smaller peers to 2 trillion won ($1.5 billion), four times bigger than original 450 billion won.

Mirae Asset Securities, NH Investment & Securities, Korea Investment & Securities, and six other big brokerage houses on Thursday have launched a specific purpose vehicle with the initial capital of 450 billion won by each pitching in 50 billion won. The company would be buying short-term securities from smaller brokerages from the fourth week of November to absorb 225 billion won worth by the end of the month.

Upon complaint that the fund would not be enough to ease liquidity crunch, the brokerages agreed to extend to line to 2 trillion won.

The industrial rescue along with state-back bond purchase program is expected to contribute to stabilizing the market faster, one market observer said.

Smaller brokerages have been running short of liquidity as their secured short-dated commercial papers backing construction and infrastructure projects have been shunned after the default declare on a municipal debt related to Legoland Korea project.