Foreign currency bond issuance in Korea amounts to $29 bn in H1

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The amount of foreign currency-denominated bonds issued by private financial institutions in the first six months of this year has surpassed last year’s total on the back of improved investor sentiment and growing need for fundraising to cover overseas business expansion.

According to a report released by the Korea Center for International Finance (KCIF) on Thursday, Korean foreign currency bond issuance stood at $29 billion in the first half of this year, down 2 percent from the same period a year ago.

Net issuance - after deducting bonds nearing maturity - reached $10.1 billion.

By month, issuance was highest in January at $10.1 billion as preemptive financing demand was concentrated that month. It was lowest in March, with $2.9 billion, triggered by the collapse of the U.S. Silicon Valley Bank.

In terms of issuers, state-owned banks accounted for 41 percent of the entire issuance. Private companies followed, with 22 percent, public companies 19 percent, and commercial banks 15 percent.

Among commercial banks, Kookmin Bank had the largest issuance with $1.45 billion, followed by Hana Bank with $860 million, and NH Bank with $780 million.

The amount of foreign currency bonds issued by private companies in the first half of the year was $6.4 billion, exceeding last year’s total of $5.2 billion.

Their share also increased significantly to 22 percent in the first half of this year from 11 percent during the same period last year.

SK hynix Inc. and POSCO Group led the private sector bond issuance, each issuing $1 billion worth of bonds in U.S. dollars since the beginning of the year.

“Investor sentiment in Korean bonds has recovered after being dampened by the bond rout triggered by Heungkuk Life Insurance Co. last year,” the report said.

By currency, 75 percent of the issuance was in U.S. dollars, followed by euros with 12 percent, Chinese yuan 3 percent, Australian dollars 2 percent, and Japanese yen with 1 percent. The share of euro issuance increased to 12 percent this year from 9 percent last year due to its lower volatility and financing costs compared to the U.S. dollar, and the share of Australian dollars also increased.

The environmental, social responsibility and corporate governance (ESG) bonds were issued $9.7 billion in U.S. dollar terms, down 18 percent from $11.8 billion during the same period last year, driven by the continued high interest rate environment and the base effect of the recent ESG boom.

The KCIF projected demand for Korean bonds to remain robust in the second half of the year, given the moderation in U.S. inflation and expectations of a soft landing in the economy.

The bonds nearing maturity in the second half of the year are estimated to be $20.9 billion, slightly up from $18.9 billion in the first half.

Regarding foreign currency bond issuance among Asian countries in the second half of this year, the report mentioned that there is a possibility that the issuance could fall short of expectations due to the abundance of existing liquidity in major Asian countries and the relatively high cost of financing in U.S. dollars.