The Korea Times close
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
Business
  • Tech
  • Bio
  • Companies
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
Entertainment
& Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
Sports
World
  • SCMP
  • Asia
Video
  • Culture
  • People
  • News
Photos
  • Photo News
  • Darkroom
  • The Korea Times
  • search
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
  • The Korea Times
  • search
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
Tue, August 16, 2022 | 23:10
Economy
Gov't to launch W10 tril. fund to aid lower-grade firms
Posted : 2020-05-20 16:49
Updated : 2020-05-21 14:57
Print Preview
Font Size Up
Font Size Down
Finance Minister Hong Nam-ki, left, speaks during an emergency economy meeting at the Government Complex in Seoul, Wednesday. Yonhap
Finance Minister Hong Nam-ki, left, speaks during an emergency economy meeting at the Government Complex in Seoul, Wednesday. Yonhap

By Lee Min-hyung

The government, the Bank of Korea (BOK) and a state-run bank will establish a 10 trillion won ($8.13 billion) special purpose vehicle (SPV) to purchase corporate bonds and commercial papers from COVID-19 hit companies with low credit ratings, the finance ministry and the central bank said in a joint press release Wednesday.

The decision is seen as an additional governmental step to expand market liquidity as the global pandemic shock is bringing longer-than-expected economic turmoil here.

The BOK and the Korea Development Bank (KDB) will provide 8 trillion won and 1 trillion won, respectively, via loans. The remaining capital will be funded by the government. The Ministry of Finance and Economy said the size of the SPV could double in accordance with how the virus aftermath unfolds and affects the local financial industry.

Under the initiative, the SPV will purchase corporate bonds mostly in the AA-rated category as well as some BB-rated bonds if their rating was downgraded in the aftermath of the coronavirus shock, the central bank said. The SPV will be run for six months.

This is a noteworthy difference between the SPV and a 20-trillion won bond market stabilization fund set up in March.

The latter only purchased A-rated bonds, in what some critics argued said was a move not in the right direction, as companies in more desperate need of financial support were not eligible.

However, the SPV is expected to help companies more vulnerable to the virus shock.

"The vehicle was established to back up companies in a financial blind spot and is primarily aimed at purchasing corporate bonds and commercial papers with low ratings," Financial Minister Hong Nam-ki said during an emergency economy meeting, Wednesday.

"We are going to place an upper limit on purchases of certain companies' bonds and commercial papers, so the fund is not seen as helping a specific firm or industrial category," he said.

Market insiders welcomed the decision, saying the move sends a clearer and more symbolic message to the market that the government is building a better defensive shield for sagging companies than its previous market stabilization steps.

"My view is that the scale of the vehicle is not that important, as the gist of the policy is to show the market that the government is willing to support more financially-vulnerable virus-hit companies," Korea Capital Market Institute economist Baek In-seok said.

"The government appears to be building a minimal level defense shield for companies suffering virus setbacks," he said. "We cannot jump to the conclusion that the 10-trillion won vehicle is not big enough to tackle the ongoing economic turmoil here. The government is leaving open the possibility of expanding the scale down the road."

The local investment industry also remained optimistic over the introduction of the SPV.

"This is theoretically a step in the right direction at this time of financial uncertainty, as this will help boost market liquidity," an official from the industry said. "The scale of the vehicle is not that big, but while at the same time, it cannot be considered small enough to ignore," the official said.

"The general outlook from the industry is that this will help temporarily relieve the financial burden of virus-hit firms, but we still have to wait and see how much of an effect it will have on the market."


Emailmhlee@koreatimes.co.kr Article ListMore articles by this reporter
 
LG
  • Hyundai Motor Group becomes world's No. 3 automaker in sales volume
  • Thinking the unthinkable on North Korea
  • 'Japan is our partner': Yoon vows to improve Seoul-Tokyo ties
  • 'Missing Here' song bridges Israel, Korea
  • Consumers angered by luxury fashion platforms' return policies
  • [Analysis] Yoon faces uphill battle to regain public trust
  • Life of early 'Koryoin' featured in exhibition
  • Western, traditional Korean medicine doctors clash over terminology
  • Customs agency considers taxing intermediaries for brokered overseas purchases
  • Will Hyundai Motor Group reorganize Mobis for governance reform?
  • Interactive News
  • With tough love,
  • 'Santa dogs' help rebuild burnt forests in Andong
  • 'Santa dogs' help rebuild burnt forests in Andong
  • A tale of natural wine
    • Girls' Generation music video director apologizes for copying design Girls' Generation music video director apologizes for copying design
    • Star directors' new series to A-listers' small screen comeback expected in coming weeks Star directors' new series to A-listers' small screen comeback expected in coming weeks
    • NewJeans sets record with debut album NewJeans sets record with debut album
    • 2PM's Lee Jun-ho proves versatility at 'Before Midnight' concert 2PM's Lee Jun-ho proves versatility at 'Before Midnight' concert
    • 'Confidential Assignment 2' has even more action, humor 'Confidential Assignment 2' has even more action, humor
    DARKROOM
    • Ice is melting, land is burning

      Ice is melting, land is burning

    • Tottenham 6-3 Team K League

      Tottenham 6-3 Team K League

    • Afghanistan earthquake killed more than 1,000

      Afghanistan earthquake killed more than 1,000

    • Divided America reacts to overturn of Roe vs. Wade

      Divided America reacts to overturn of Roe vs. Wade

    • Namaste: Yogis to celebrate International Yoga Day

      Namaste: Yogis to celebrate International Yoga Day

    The Korea Times
    CEO & Publisher : Oh Young-jin
    Digital News Email : webmaster@koreatimes.co.kr
    Tel : 02-724-2114
    Online newspaper registration No : 서울,아52844
    Date of registration : 2020.02.05
    Masthead : The Korea Times
    Copyright © koreatimes.co.kr. All rights reserved.
    • About Us
    • Introduction
    • History
    • Location
    • Media Kit
    • Contact Us
    • Products & Service
    • Subscribe
    • E-paper
    • Mobile Service
    • RSS Service
    • Content Sales
    • Policy
    • Privacy Statement
    • Terms of Service
    • 고충처리인
    • Youth Protection Policy
    • Code of Ethics
    • Copyright Policy
    • Family Site
    • Hankook Ilbo
    • Dongwha Group