South Korean companies are rushing to raise money in the domestic corporate bond market, which is unusually buoyant at the end of a year amid expectations of interest rate cuts in 2025 with dissipating uncertainties over the US presidential election.
Hanwha Ocean Co., the country’s third-largest shipbuilder, plans a bookbuilding session on Tuesday to sell 50 billion won ($35.8 million) in corporate bonds including 20 billion won in notes with a maturity of one and a half years and 30 billion won with a maturity of two years to repay the maturing commercial papers, according to investment banking industry sources.
The company rated at BBB+ by local credit ratings agencies is set to increase the sale to up to 100 billion won depending on demand, the sources said.
Hanwha, formerly Daewoo Shipbuilding & Marine Engineering Co., last issued corporate bonds nine years ago.
HS Hyosung Advanced Materials whose credit ratings is A plans to sell 120 billion won in corporate bonds on Nov. 27, its first debt issuance in three years.
Last month, Pan Ocean Co. and HK inno.N Corp. both rated A successfully sold out their corporate bonds during bookbuilding sessions.
INFLOWS ON RATE CUT EXPECTATIONS
The domestic corporate bond market is enjoying sustained inflows, industry sources said.
“Investors continued to expect rate cuts next year in the fourth quarter,” said Kim Eun-ki, an analyst at Samsung Securities Co. “We may not see the seasonal year-end weakness this year as the bond market has not suffered major outflows.”
The corporate bond market typically contracts in November and December as institutional investors close their books, drying up liquidity.
A credit spread, the difference in yield between two debt securities of the same maturity but different credit quality, narrowed as the market defied the trend.
The yield spread between the highly liquid South Korean government’s three-year bond and non-guaranteed corporate notes rated AA- narrowed to 56 basis points (bps) on Monday from 75 bps earlier this year.
That indicated investor sentiment on local corporate bonds improved, industry sources said.
By Hyun-Ju Jang
blacksea@hankyung.com
Jongwoo Cheon edited this article.
