JPMorgan sees South Korea as an exception in the world of declining bond trading

South Korean borrowers are bucking the global trend of weak bond sales and JPMorgan Chase & Co expects foreign currency corporate issuance to maintain its strong pace for the rest of the year. ‘year.
The U.S. bank, the Asian nation’s biggest offshore bond sales arranger this year, says higher ratings for Korean companies and less erratic debt moves should continue to attract buyers, who have grown more nervous.
“Investors who need to put their money somewhere in the middle of volatility want to buy bonds that will sell for less, which makes Korean debt attractive,” said SG Lee, head of Korean debt capital markets at Seoul-based JPMorgan in an interview. “Korean bonds have been viewed as safe-haven assets.”
Global fixed-income investors have suffered double-digit losses this year as central bankers aggressively tightened policy to control inflation. This has led to a 14% drop in US investment grade corporate bonds since the start of the year.
Holders of Korean dollar-denominated bonds have suffered less, with debt falling 7.2% so far in 2022, the least negative performance for U.S.-currency debt for borrowers of any Asian country, according to a report. Bloomberg Emerging Markets Fixed Income Index.
Korean offshore debt sales totaled $28.7 billion in the first six months of 2022, slightly below last year’s first-half record and bucking the significant downtrend in ticket sales worldwide.
Lee expects foreign-currency bond sales by Korean borrowers in the second half of the year to be similar to the $16 billion in issuances during the same period of 2021, a record year for note issuances.
The share of Korean issuers in the region’s dollar debt offerings has risen to 16% this year, from around 9.5% in 2021 and 5.5% so far in 2020, according to data compiled by Bloomberg. Issuance of dollars, euros and yen by Asian borrowers outside Japan fell 42% over the same period, the data showed.
South Korean issuers, especially government-held ones, lost less in riskier markets, in part because of their higher ratings and relatively strong credit fundamentals compared to other emerging market peers. The South Korean sovereign has some of the highest credit ratings in Asia, with AA or its equivalent from S&P Global Ratings and Moody’s Investors Service.
Still, reflecting the rout in credit markets this year, investors are demanding more premiums on new issues recently, given relatively tight Korean spreads and large issuances this year, according to JPMorgan’s Lee. However, with rising interest rates in the country, it may still be cheaper for some Korean borrowers to sell dollar debt and exchange the funds for won rather than tap into the local debt market. , did he declare.
The so-called average concessions of new issues in the dollar market, i.e. the difference between the spread over Treasury bills on a company’s new bond and the spread on an outstanding maturity similar, have widened this year as volatility has increased.
Korea Hydro & Nuclear Power Co paid a new concession of around 31 basis points on a ticket sale this week, while Korea Gas Corp paid a comparable 23 basis points earlier in the month, according to a Bloomberg analysis.
Concessions have varied widely in the high-quality dollar bond market this year, being around 27 basis points earlier this week, while the year-to-date average is around 12 basis points. , according to data compiled by Bloomberg.

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