Direct corporate lending fell 49% in October

Commuters cross the street in Jongno District, central Seoul, November 17, 2022. [NEWS1]

Thursday’s data showed South Korea’s direct business lending fell 49% from the previous month in October as interest rate hikes weighed on business activity.

Local businesses raised a combined 8.79 trillion won ($6.51 billion) last month by selling stocks and bonds, up from 17.2 trillion won the previous month, according to Financial Supervisory Service (FSS) data. decreased to

Direct financing refers to raising funds directly from the stock or bond market without borrowing from a bank or other financial institution.

Sales of corporate bonds issued mainly for operating expenses rose 21.7% month-on-month to 1.39 trillion won in October.

But bank bonds and asset-backed securities (ABS), issued primarily to renew debt, fell. Bank bonds plunged 54.7% month-on-month to 6 trillion won, while ABS fell 55.9% month-on-month to 911.2 billion won, according to Financial Services Agency data.

The decline in direct lending is due to a sharp rise in borrowing costs.

South Korea’s central bank has raised its policy rate eight times by a combined 2.5 percentage points since August last year to curb inflation.

Meanwhile, funds raised through the stock market fell by 36.1% to KRW 487.5 billion in the quoted period as the slump in financial markets restrained initial public offerings and capital increases.

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