Firms Told to Issue More Stocks
By Cho Jae-hyon
Staff Reporter
Financial Supervisory Commission Chairman Yoon Jeung-hyun called for enterprises to reduce their borrowings from financial firms and instead raise funds by issuing stocks and bonds.
``For firms to smoothly raise funds, they should increase reliance on the securities market and cut borrowing from banks,'' Yoon said at a seminar.
He said that small-to medium-size enterprises are too much reliant on banks and policy loans for their funding.
Yoon said the financial authorities will not spare efforts for companies to be able to raise more funds through direct financing such as issuing securities.
But he did not specify which steps the government will take.
Direct financing gained 2.7 percent in May from a month earlier as companies increased funding through selling shares. Local companies raised 4.6 trillion won ($4.9 billion) by issuing shares and bonds in May, up from 4.5 trillion won the previous month, the Financial Supervisory Service said.
Issuance of shares surged 57.1 percent month-on-month to 799 billion won last month as rights offerings increased 41 percent to 709 billion won amid a boom on local bourses.
During May, the benchmark Korea Composite Stock Price Index (KOSPI) gained 9.5 percent and the KOSDAQ index added 9.6 percent.
Rights issues on the KOSPI rose more than seven times to 256 billion mainly because Seoul Securities Co. raised 230 billion won through issuing new stock. Rights issues on the tech-heavy KOSDAQ market also gained 17.5 percent to 428.2 billion won.
IPOs soared 19-fold to 89.1 billion last month thanks to the sizzling KOSDAQ market. There have been no initial share sales on the key index so far this year.
Bond issues sank 4.3 percent month-on-month to 3.8 trillion won in May. Bonds floated by non-financial companies fell 19.7 percent to 2.2 trillion won and asset-backed securities issues dipped 4.5 percent to 565.9 billion won. But bonds issued by financial firms jumped 63.7 percent to 1 trillion won.