DistantNews
Support us
🇰🇷 South Korea /Economy & Trade

Bond market 'big hand' SK Hynix's money: Will bonds to be acquired in August be scarce?

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • SK Hynix, a major player in the semiconductor industry, has been actively investing in high-grade bonds using its surplus cash and IPO funds.
  • The company's significant bond purchases have made it a key investor in the domestic bond market.
  • However, the issuance of bonds suitable for SK Hynix's investment criteria is expected to decrease in August, as companies increasingly favor shorter-term financing due to high interest rates.

SK Hynix, bolstered by a booming semiconductor market and funds raised from its US IPO, has emerged as a major investor in South Korea's bond market. The company has actively purchased high-grade corporate bonds, bank bonds, and specialized financial company bonds with maturities of around two to three years during June and July.

This aggressive investment strategy has positioned SK Hynix as a significant "big hand" in the domestic bond market. For instance, the company reportedly acquired a substantial portion of NH Investment & Securities' 500 billion won ($370 million) unsecured corporate bond issuance with a three-year maturity in late July. This influx of capital has been crucial, especially during periods when investor sentiment towards corporate bonds had weakened.

The semiconductor giant (Hynix) is injecting funds.

— KB SecuritiesKB Securities noted SK Hynix's capital inflow as a factor supporting the bond market, even amidst increased issuance of public bonds.

However, the landscape is shifting. In August, the availability of bonds that meet SK Hynix's investment criteria is expected to shrink considerably. This scarcity is driven by companies increasingly opting for shorter-term financing options, such as bank loans and commercial paper (CP), to mitigate the burden of high interest rates associated with longer-term bond issuances.

The trend is evident in the declining direct financing through corporate bonds, which saw a decrease of over 15.2% in the first half of the year compared to the previous year. Conversely, issuances of commercial paper and short-term bonds have surged. This shift suggests that SK Hynix may need to redirect its substantial funds towards shorter-term instruments like money market funds (MMFs) or trusts, or even explore investments in government bonds, although the latter would require internal review.

Government bonds are a new area of operation for Hynix, so it's difficult to start immediately. It requires an internal review process. Therefore, funds are likely to flow to MMFs, trusts, funds, and short-term bonds with maturities of one year or less first.

— Bond market officialA bond market official commented on SK Hynix's potential investment strategies given the changing market conditions.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

More Stories

From Our Blog