SK hynix (000660.KS), flush with massive cash from the semiconductor boom, has emerged as a major player in the card bond market. The company has purchased more than 1.4 trillion won worth of premium card bonds offering yields of around 4 percent. As card issuers have successively issued bonds with maturities designed to match SK hynix's fund management schedule, this trend has recently spread to the bank bond market as well.
According to the financial industry Thursday, SK hynix purchased a total of 1.43 trillion won worth of card bonds rated AA or higher in the first half of this year, issued by Shinhan, KB Kookmin, Hyundai, BC, Woori, and Samsung Card. Of this amount, 930 billion won was issued this month, with yields ranging from 4.1 to 4.2 percent.
This month alone, the company absorbed large volumes successively issued by major card companies, including 250 billion won from Woori Card and 220 billion won from Shinhan Card. In the corporate bond market, many of the card bonds issued this year worth 100 billion won or more with unusual maturity structures are believed to have been issued to meet SK hynix's investment demand.
SK hynix's presence began to grow in earnest in April. The asset management firm entrusted with SK hynix's funds is reported to have contacted issuers (card companies) and lead underwriters. In response, card companies successively offered customized maturity bonds tailored to SK hynix's investment schedule, such as "two years and four days" or "two years, two months, and 24 days," rather than the typical two-year bonds.
Regarding the background that made such customized bond issuance possible, an official in the card industry explained, "It is thanks to the issuance system built for liquidity management after the past card crisis." The official added, "Because maturities can be adjusted on a daily basis, bonds can be issued to match investors' fund execution schedules, and the issuance process is relatively fast, making it easy to respond to the demand of institutional investors managing large-scale funds."
SK hynix increased its proportion of financial bond investments because it can secure higher yields than deposits while maintaining stability. Recently, corporate deposit rates for large companies have formed in the high 2 percent range. By contrast, AA-rated card bonds offer yields of around 4 percent. The yields on recently issued card bonds were 4.285 percent for BC Card, 4.275 percent for Shinhan Card, and 4.274 percent for Hana Card.
Such customized issuance is spreading beyond card bonds into the bank bond market. NH Nonghyup Bank and SC First Bank issued bank bonds worth 400 billion won and 260 billion won, respectively, on the 18th, with both bonds set to mature on April 3, 2029. These are cases where specific dates were designed as maturities to match investors' fund management schedules.
The market expects that SK hynix's cash and cash equivalents, which have grown due to the semiconductor boom, will continue to flow into the financial bond market for the time being. In the past, the company managed its funds mainly through commercial paper (CP) and short-term card and finance bonds with maturities of one year or less, but it has recently broadened its investment targets to include medium- and long-term financial bonds maturing in 2028 to 2029.
A bond officer at a securities firm said, "In the past, it was strongly characterized as short-term investment for liquidity management, but recently the strategy has shifted to managing funds with longer maturities that also consider yields." The officer added, "It is establishing itself as a major investor not only in the card bond market but also in the bank bond market."
In the bond market, there are assessments that SK hynix's fund inflows are also having a positive impact on the supply and demand of premium financial bonds. A market official said, "As SK hynix has recently played the role of a key source of demand in the card bond and bank bond markets, issuance conditions are also improving considerably."
