Corporate direct financing down 22.2% in August

Direct financing by South Korean companies plunged 22.2 percent on-month in August as they avoided selling shares amid the global economic downturn, the financial regulator said Tuesday.

Local companies raised 9.26 trillion won ($8.29 billion) last month by issuing stocks and bonds, compared with 11.9 trillion won a month earlier, according to the Financial Supervisory Service (FSS).

Shares sold by local firms reached 118.7 billion won in August, down 44.8 percent on-month, with no initial public offerings (IPO) reported, the FSS said, adding the on-month tumble came as local businesses shunned equity financing due to lingering global uncertainties.

Corporate bond issuances reached 9.14 trillion won in August, down 21.8 percent from the previous month, with those excluding debts sold by financial firms tumbling 40.6 percent to 3.81 trillion won.

In contrast, the issuance of asset-backed securities (ABS) shot up 155 percent on-month in August, mainly due to a large-scale ABS sale by LG Uplus Corp., South Korea's smallest mobile carrier.

The cumulative amount of corporate direct financing came in at 87.3 trillion won in the January-August period, down 5.7 percent from a year earlier, according to the watchdog.

"Companies were less active in raising funds through direct financing last month because they sought after securing funds in July after the central bank lowered the key rate," an FSS official said.

The Bank of Korea cut its key interest rate by a quarter percentage point to 3.00 percent in July, for the first time in more than three years. (Yonhap)