Bond fund plan raises brokerages

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Bond fund plan raises brokerages

Shares in many local brokerages rose yesterday on expectations that an up to 10 trillion won ($6.81 billion) government bond boosting scheme will stabilize the ailing bond market.

Bonds account for a major portion of brokerages’ asset portfolios.

Woori Investment and Securities rose 650 won, or 5.8 percent, to 11,850 won.

Daewoo Securities advanced 4.7 percent, while KTB Investment and Securities and Hyundai Securities climbed 6.7 percent and 2.8 percent, respectively. SK Securities and Yuhwa Securities headed north by 7.6 percent and 4.5 percent, respectively.

The government said yesterday it plans to create a bond market stabilization fund worth 3 trillion won to 5 trillion won level by mid-month with the size to gradually increase to 10 trillion won.

Recently, yields on corporate bonds have risen sharply due to a shortage of demand. Yields move inversely to prices.

According to Korea Securities Dealers Association data released yesterday, bond trading volume fell on-year by 16.3 percent last month.

“Share prices of brokerages have fallen significantly recently as investors look at the worst possible scenarios regarding the bond market,” said Chung Bo-seung, an analyst at Hanwha Securities. “With its plan to create the bond market stabilization fund, the government is assuring investors that uncertainty in the bond market will be eased.”

Most bond investors including brokerages sell bonds before they reach maturity, so price means more to them than yields in terms of investment.

By Moon Gwang-lip Staff Reporter []
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