Hanjin, a BBB+ rated South Korean logistics company, experienced 10 billion won in unsold 1-year maturity bonds during demand forecasting held on the 14th, despite receiving 440 billion won in total orders against a 400 billion won募集 target. The partial unsold amount occurred as retail investor participation and high-yield fund demand weakened following corporate default incidents involving JR Global REIT and Joong-Ang Group. The development reflects broader BBB-grade corporate bond market contraction in South Korea, where first-half BBB+ bond issuance dropped 60.9% year-over-year to 260 billion won.
Hanjin Demand Forecasting Shows Uneven Results Across Maturities
Hanjin conducted demand forecasting for a total 400 billion won public corporate bond issuance with plans to increase up to 800 billion won based on results. The 1-year maturity tranche募集 200 billion won but received 190 billion won in orders, leaving 10 billion won unsold. The 1.5-year maturity tranche募集 200 billion won and received 250 billion won in orders. The company conducted separate demand forecasting for each maturity, resulting in the unsold amount in the 1-year tranche despite total orders exceeding the募集 target.
Market participants noted that Hanjin holds a credit rating outlook of "positive" within the BBB+ grade, positioning it as a relatively higher-quality issuer. The unsold amount occurred even at the upper end of the希望 interest rate band. A credit industry official stated that the result reflects weakened traditional demand sources for BBB-grade bonds rather than individual company creditworthiness issues.
BBB-Grade Bond Market Experiences Investor Demand Contraction
Retail investor withdrawal and reduced high-yield fund inflows simultaneously affected BBB-grade bond demand. Individual investors began avoiding BBB-grade bond investments following the JR Global REIT and Joong-Ang Group default incidents. High-yield fund inflows targeting IPO priority allocation benefits decreased significantly due to sluggish initial public offering market conditions.
Absolute interest rate attractiveness of BBB-grade corporate bonds weakened as a supporting factor. High interest rates previously provided incentive to accept credit risk, but recent market perception indicates insufficient interest rate compensation relative to risk levels.
BBB+ Bond Issuance Drops 60.9% in First Half
BBB+ grade corporate bond issuance totaled 260 billion won in the first half, down 60.9% from 665 billion won in the same period of the previous year, according to BondWeb data. BBB+ corporate bond redemptions increased from 432 billion won to 560 billion won over the same period. The market shifted from 233 billion won in net issuance during the previous year's first half to 300 billion won in net redemption in the current first half.
Reduced new issuance combined with increased existing bond redemptions significantly decreased BBB-grade company access to public bond markets. Market observers expect BBB-grade company public corporate bond financing to remain challenging in the near term. Some analysts forecast that differentiation based on individual company financial structure and performance will re-emerge as default incident impacts subside and investor sentiment stabilizes.
Corporate Bond Market Shows Polarization Between Credit Grades
Polarization between high-grade and lower-grade bonds intensified during the same period. Kiwoom Securities (AA rated, stable outlook) secured orders significantly exceeding its募集 amount during demand forecasting, while Hanjin experienced partial unsold amounts.
NH Investment & Securities researcher Choi Sung-jong stated that polarization is intensifying as Kiwoom Securities secured funds exceeding its planned募集 amount while Hanjin experienced partial unsold amounts. Choi added that credit products currently possess carry attractiveness based on elevated interest rate levels as Bank of Korea base rate increases reflected in market rates. Choi projected that carry investment demand will continue as the possibility of rapid interest rate increases remains limited despite remaining caution regarding base rate increase timing and frequency.
FAQ
What happened during Hanjin's corporate bond demand forecasting on the 14th?
Hanjin received 440 billion won in orders for a 400 billion won corporate bond issuance but experienced 10 billion won in unsold amounts in the 1-year maturity tranche. The 1-year tranche募集 200 billion won but received only 190 billion won, while the 1.5-year tranche募集 200 billion won and received 250 billion won.
Why did BBB+ bond issuance decrease in the first half?
BBB+ grade corporate bond issuance dropped 60.9% to 260 billion won in the first half compared to 665 billion won in the previous year's first half. Retail investor withdrawal and reduced high-yield fund inflows following corporate default incidents contributed to weakened demand for BBB-grade bonds.
How did Kiwoom Securities' demand forecasting results differ from Hanjin's?
Kiwoom Securities, rated AA with a stable outlook, secured orders exceeding its募集 amount during demand forecasting conducted in the same period. This contrasted with Hanjin's partial unsold amounts, demonstrating intensified polarization between high-grade and lower-grade corporate bonds in the market.
