How do you solve a problem like Korea?

The cloud hanging over South Korea’s financial markets has been lifted after the country’s president Park Geun-Hye was ordered to resign her office last week, impeached following a six month influence peddling scandal involving her close friend Choi Soon-Sil.

  • By Jonathan Breen
  • 14 Mar 2017
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But markets should not get too comfortable as there are enough unsettling events happening at home and in the region to keep volatility at the elevated levels it was seen at before the ruling last Friday.

Granted, an uncertainty that had been weighing on the Korean markets is gone. And it is clear investors are feeling positive about the decision, with the Kospi having shot up 1.7% since the announcement on March 10 to close on Tuesday at 2,133.78.

But it is doubtful this upswing will last, certainly in the country’s equity capital markets.

The Park scandal caused a lull in Korean ECM this year, with little taking place but a handful of block trades in the secondary market and a pair of domestic investor-focused rights issues.

And while there have been IPOs, most have been in the $10m-$20m range. Certainly, there has been no IPO worth more than $75m since November, according to Dealogic data. This is despite ECM bankers predicting that the first quarter would be a strong one for new listings.

Now with the impeachment out of the way, bankers say that a window for deals has opened, likely for a few more blocks, but that it won’t be open for long. That’s because the scandal that brought down Park is not the only problem Korea is facing. And whoever is elected as the new leader within the specified 60 days will still have to deal with the issues.

The most troubling dilemma the country is facing is the placement of the US-backed THAAD missile system in the country. The decision to go ahead and install the system has seen a strong backlash from China, angered by THAAD’s ability to monitor its missile activity.

In addition, the country’s family-led conglomerates, known locally as chaebol, have also troubled markets, tied to the presidential scandal by accusations of corruption and influence peddling. In particular, Samsung Group has dominated headlines after its heir apparent Lee Jae-Yong was brought up on bribery charges.

So any company planning an IPO has a small window if they want to make it through before the election.

But it is likely that Netmarble Games is going to attempt to price before that deadline, potentially as soon as April. That could be a problem because the W2tr ($1.7bn) IPO is expected to be one of the largest this year and most other issuers will want to avoid launching their listings to clash with the game developer.

The result is likely to be that deal flow will be limited in the primary market for at least the rest of the first half.

For the moment, issuers are playing a waiting game. The THAAD dispute could be over by the second half of the year and calm and confidence could return to Korea and its markets in no time. But that’s a best case scenario and as the events of recent months have shown, it better to prepare for the worst.

  • By Jonathan Breen
  • 14 Mar 2017

Panda Bonds Top Arrangers

Rank Arranger Share % by Volume
1 Bank of China (BOC) 28.62
2 CITIC Securities 21.06
3 China CITIC Bank Corp 9.72
4 China Merchants Bank Co 9.18
5 Industrial and Commercial Bank of China (ICBC) 7.56

Bookrunners of Asia-Pac (ex-Japan) ECM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 2,028.67 5 15.91%
2 Huatai Securities Co Ltd 1,006.47 5 7.89%
3 Citi 773.86 5 6.07%
4 Morgan Stanley 604.46 4 4.74%
5 China International Capital Corp Ltd 547.16 2 4.29%

Bookrunners of Asia Pacific (ex-Japan) G3 DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 3,253.25 9 8.50%
2 Citi 2,657.81 16 6.95%
3 JPMorgan 2,627.80 6 6.87%
4 Morgan Stanley 2,299.31 10 6.01%
5 HSBC 2,283.76 20 5.97%

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