Local stock market amid a deepening global slowdown
South Korean firms’ financing through initial public offerings (IPO) and rights offerings tumbled to the lowest mark in 12 years in the first half, reflecting their difficulties in raising funds in the local stock market amid a deepening global slowdown, data showed Monday.
The combined amount of equity financing by listed firms here reached US$ 545.1 million in the first half of this year, accounting for a mere 0.05 percent compared with the total market capitalization of $ 1.24 trillion, according to a report by the World Federation of Exchanges (WFE).
The proportion of equity financing to the total market cap had stood higher at 0.39 percent at the end of last year, but it still trailed behind those of Australia, Hong Kong and the United States, the report said.
South Korea came last in terms of equity financing out of 15 countries studied by the WFE, with China topping the list at 1.80 percent, followed by Spain at 1.79 percent and Australia at 1.55 percent. The United States ranked second and Japan came 14th in the list, the report showed.
The sharp fall came as the direct financing in the local stock market has been sought mainly by large firms, rather than smaller or start-up companies that need initial funds to grow, market watchers said.
Only 1.1 percent of smaller firms in South Korea raised funds via IPOs or rights offering, with the rest raising funds from banks, according to the Korea Federation of Small and Medium Business.
“All you need is some collateral for loans extended by banks. The procedure is much more complicated for IPOs or rights offering, which make firms shun such means to raise money in the local stock market,” an executive at a brokerage said, asking not to be named.