Credit bond issuances by conglomerates reach all-time high in H1

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Korean conglomerates have raised capital through corporate bond markets at an all-time high level during the first half of this year due mainly to favorable market conditions for refinancing amid anticipated interest rate cuts within the year.

According to the investment industry on Monday, the aggregate amount of corporate bonds issued by large-sized enterprises — business groups that are subject to mutual investment restrictions under Korean regulations — in the first half of this year stood at 38.4 trillion won ($27.8 billion).

It is an increase of 7.2 percent, compared to the same period last year, and it is also the highest-ever level recorded during the first half of any year.

By group, the issuance volumes of SK, Lotte and LG accounted for 28.4 percent, or 14.73 trillion won, of the total corporate bond issuance by conglomerates.

SK Group's issuance volume in the first half of the year (6.99 trillion won), however, fell by about 10 percent compared to the same period last year (7.86 trillion won), a strategy to reduce the group's financial burden.

When it comes to the rate of increases, Hanwha and Shinsegae recorded the highest growth rate in corporate bond issuances during the first half of this year.

Hanwha Group issued 2.28 trillion won worth of corporate bonds, with Hanwha Aerospace raising a total of 700 billion won. The amount is close to the group's total issuance volume of 2.39 trillion won last year.

Shinsegae Group has raised 2.14 trillion won during the same period, with Shinsegae Engineering & Construction successfully issuing hybrid securities worth 650 billion won. The amount of capital raised by the group in the first half also nears Shinsegae's entire annual bond issuance of 2.39 trillion won last year.

Following the two groups' lead, Hanjin Group also amassed 1.1 trillion won during the first half, with Korean Air raising 850 billion won for the group. This amount surpassed the group's total issuance amount of 748 billion won last year.

Market watchers forecast that demand for corporate bond issuance will remain robust in the second half, with investors actively investing in bonds amid high expectations for potential interest rate cuts.

"As major institutional investors have all but halted injecting capital into alternative investments, the proportion of investment into corporate bonds is increasing," Kim Ki-myung, an analyst at Korea Investment & Securities, pointed out.