The financial district of Yeouido in Seoul. (Yonhap).
SEOUL, Aug. 29 (Korea Bizwire) — South Korean companies are choosing to reduce the issuance of corporate bonds and are instead turning to bank loans to secure funds during an unexpectedly prolonged period of high interest rates, data showed Monday.
Net repayments in the corporate bond market have shown a consistent upward trend, with the amounts increasing from 84 billion won (US$63.4 million) in April to 2.37 trillion won in May, followed by 663 billion won in June, and another 2.37 trillion won in July, according to Yonhap Infomax, the financial data firm of Yonhap News Agency.
Up until the previous Friday, net repayments for the current month had already surged to 1.84 trillion won.
According to the Bank of Korea, the outstanding balance of bank loans to large conglomerates surged by 20.3 trillion won during the period from January to July of this year.
While the average monthly increase in outstanding balances stood at 2.5 trillion won in the initial quarter of this year, this figure skyrocketed to 3.2 trillion won from April through July.
“From a business perspective, the challenging conditions in the corporate bond market regarding fundraising have spurred an increased desire to diversify fundraising avenues. As a result, this has led to a rise in bank loans,” said Kim Sang-man, an analyst at Hana Securities.
Kevin Lee (kevinlee@koreabizwire.com)
