이 기사는 2020년 01월 31일 08:00 thebell 에 표출된 기사입니다.

Euro-denominated bonds are emerging as a new funding source among Korean paper issuers, with increasing number of South Korean companies tapping the euro-denominated bond market.

According to thebell Plus, euro-denominated bonds accounted for 11.88 percent of the Korean paper market (public offering) in 2019. Korean paper refers to foreign currency debt issued by South Korean entities abroad.

A total of five issuers raised funds via euro-denominated bonds, including The Export-Import Bank of Korea (Eximbank) (750 million euros), LG Chem (500 million euros), Korea Housing Finance Corporation (500 million euros), Korea Development Bank (KDB) (500 million euros) and Shinhan Bank (500 million euros). In 2019, euro-denominated bonds accounted for more than 10 percent for the first time since 2013 (14.15 percent).

In terms of currencies, a total of around 3.09 billion dollar worth euro-denominated bonds was sold last year in the Korean paper market. It was the second largest, following dollar-denominated bonds (18.45 billion dollars) and twice the amount of Swiss franc-denominated bonds (1.6 billion dollars).

What was notable is that South Korean private sector companies have started to issue euro-denominated bonds. Last year, LG Chem sold dollar- and euro-denominated bonds on the back of demand for the euro. Shinhan Bank issued euro-denominated debt in October of 2019. It was the first commercial bank who issued such bonds.

Up until now, euro-denominated bonds in the Korean paper market were mostly sold by public companies. In 2013, when euro-denominated bond market was booming, state-run companies, including Eximbank, KDB, Korea Gas Corporation, Korea National Oil Corporation and Industrial Bank of Korea (IBK) dominated euro-denominated bond market.

Ample liquidity in the European market seems to have enhanced investor’s sentiment on Korean papers. As the European Central Bank (ECB) keeps buying bonds with its monetary policy remaining accommodative, Europe’s bond market is shining in general. Issuers can take advantage of spread tightening and a favorable euro-dollar swap as well.

Korean paper’s stability has also improved. In the past, European institutions mainly invested in Singapore and Japan among Asian countries. Now with Korean government maintaining its global sovereign credit ratings at AA, Korean papers’ stability has improved.

The trend is expected to continue in 2020. South Korea’s largest steel maker POSCO issued euro-denominated bonds for the first time earlier this month. Korea Housing Finance Corporation plans to issue euro-denominated covered bond this year.

European institutions’ strong interest in ESG (environmental, social and governance) bonds also is a tailwind. Demand for ESG bonds is mostly from European market and this makes Korean paper issuers consider euro-denominated ESG bond offerings. ESG bonds started to become mainstream in the Korean paper market in 2018. When selling euro-denominated bonds earlier this month, POSCO issued them in the form of sustainability bonds.

(By reporter Pi Hye-rim)