Borrowing conditions sharply improved for Korean financial institutions whose creditability is on par with sovereign credit rating at third to fourth highest in global rating scale as investors find the Korean economy less harmed from the pandemic crisis due to nifty handling of virus environment.

Shinhan Bank issued $500 million worth Formosa bonds in Taiwan in April at a yield of 170 basis points over the three-month Libor interest rate. State-run Korea Development Bank (KDB) also offered $500 million dollar-denominated debts at 145 basis points over the U.S. treasury of the same maturity in the same month. The Export-Import Bank of Korea (EXIM Bank) sold foreign currency bonds at 105 to 120 basis points spread.

The spread sharply dropped to 88 basis points when Shinhan Bank offered Kangaroo bonds last month. The EXIM Bank also sold debts at a spread of 35 to 65 basis points, which was cut almost by half from April offerings.

Korean bonds attract increasing demand from foreign investors on improved market liquidity amid the government’s aggressive economic stimulus policy and successful infection control. An official from Woori Bank said foreign investors showed high interests in Korea’s quarantine solutions and economic policy response when the bank held IR roadshow this month to sell Kangaroo bonds.

Korean lenders and financial firms are rushing to offer debts in the overseas market on the back of the sizzling demand and ultra-low interest rates. According to sources from the financial industry, the EXIM Bank, Tongyang Life Insurance, Hyundai Capital America and Shinhan Bank issued foreign currency debts last month, and Shinhan Card and Woori Bank this month. KDB, KB Capital and KB Kookmin Bank are also prepping similar offerings.

Korean debts are appealing as they deliver greater returns than most developed markets and are secure versus emerging market debt. “Investors flock to Korean bonds as they generate relatively high returns on lower default risks,” an official from a local bank said.

By Kim Hye-soon and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]