Korea to reduce bond issuance of state-run firms, stabilize market

Finance Minister Choo Kyung-ho speaks during a meeting in Seoul on Nov. 28. [YONHAP]

Korea plans to reduce the issuance of bonds by state-run companies, the finance ministry said Monday, in line with the country's efforts to stabilize the bond market hit by uncertainties.

The plan was announced during an emergency meeting of economy-related ministers in Seoul earlier in the day, presided over by Finance Minister Choo Kyung-ho, according to the Ministry of Economy and Finance.

"Under cooperation with the banking sector, we will seek to have state-run organizations, including Korea Electric Power and Korea Gas, reduce their bond issuance, or issue them over different periods, and have them seek bank loans," the finance ministry said in a release.

The move came as Korea's capital market, especially the corporate bond market, has been facing jitters in the wake of a recent Legoland-linked debt default and growing worries over a credit crunch.

Korea also decided to activate a bond market stabilization fund worth 5 trillion won ($3.73 billion) through a capital call.

The ministry said Korea also plans to sell just 3.8 trillion won in government bonds next month, in line with efforts to ease the market's burden. In November, the government issued 9.2 trillion won in state bonds.

Last month, Korea's financial authorities announced plans to expand liquidity supply programs to at least 50 trillion won as part of efforts to calm corporate bond market jitters.

"Until the end of this year, there are still key events remaining, including the announcement of inflation data and the rate setting of major countries," Choo said during the meeting.

The minister added the recent strike of truckers is expected to further weigh on the Korean economy, which may potentially lead to more volatility in the local financial market.

Yonhap