Direct financing a good sign

Direct financing by Korean companies went up in February, indicating market conditions that have been hard hit by an economic slowdown are starting to improve.

According to data released by the Financial Supervisory Service yesterday, local companies raised 12.1 trillion won ($10.8 billion) in February through direct financing by issuing stocks and bonds. The February statistic is up 68.6 percent compared to 7.1 trillion won in the previous month.

In February, the country’s benchmark Kospi index showed an upward trend, while the market interest rate was lowered. These multiple factors improved market conditions naturally encouraged companies to seek capital increases by issuing new stocks and corporate bonds, and preparing for initial public offerings, observers said.

The cumulative debt and equity issues from January to February amounted to 19.1 trillion, however, was down 18.5 percent from 23.4 trillion.

“Improved market conditions have spurred February’s month-on-month increase in corporate direct financing,” said an official at the FSS. “If market conditions were bad, they wouldn’t issue bonds and stocks.”

Companies, mainly large ones, issued a total of 11.8 trillion won worth of corporate bonds, which is up 69 percent from the previous month.

The growth is largely attributed to surging sales of so-called asset-backed securities, which spiked to 3.4 trillion won from 293.5 billion won over the cited period.

The financial watchdog explained that ABS sales soared because mobile telecom companies raised 2 trillion won while builders and small and medium enterprises raised a total of 1 trillion won.

In February alone, stocks issued by companies totaled 252.9 billion, up 60.8 percent from 157.3 billion won a month earlier.

Out of 252.9 billion won, four initial public offerings raised 97.4 billion in February, a 28.3 percent increase from four IPOs that amassed 75.9 billion won a month earlier. The four companies are WINPAC (13.7 billion won), Corentec (123.6 billion won), 0TO7 (18.2 billion won) and GD (43.2 billion won).

By Kim Mi-ju [mijukim@joongang.co.kr]