Corporate Bond Issuance Plunges 24% as Rates Spike, Sounding Alarm for Corporate Funding

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an AI-powered customized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and delivers six tailored news stories for each reader type.

1. ETF Share Triples in Four Years — 'Return to Korean Market' and Diversification Become New Normal

- Key Summary: An analysis of approximately 10 million individual client accounts at Korea Investment & Securities, commissioned by the Seoul Economic Daily, showed that as of the 20th of this month, the ETF balance share stood at 15.79%, nearly tripling from 5.58% in 2023 over four years. Total ETF market capitalization reached 372.9 trillion won, roughly doubling from a year earlier, and average daily trading value in March surged fivefold year-on-year to 20.4 trillion won. This year's top net-purchased products have shifted to domestic instruments such as KODEX KOSDAQ 150 and KODEX 200, contrasting sharply with last year's focus on U.S. index products. Meanwhile, the share of leveraged ETF balances shrank from 0.10% in 2023 to 0.06% this year, suggesting that long-term, diversified investment strategies are becoming the norm.

2. March Inflation in Focus as Korean Sovereign Bonds Begin WGBI Inclusion

- Key Summary: Korean government bonds will be included in FTSE Russell's World Government Bond Index (WGBI) starting April 1, with the securities industry expecting approximately $60 billion in overseas capital inflows by November. Attention is focused on the stabilizing effects this may have on bond yields and the won-dollar exchange rate. Meanwhile, a spike in international oil prices driven by the U.S.-Iran conflict has raised the possibility that March consumer price inflation reached the low-to-mid 2% range, and the eurozone's March CPI estimate has also risen sharply to 2.7% from 1.9% the previous month. Separately, a supplementary defense budget of approximately 25 trillion won is expected to be approved at a Cabinet meeting on the 31st, and financial authorities are also expected to announce household loan management measures including a ban on mortgage extensions for multi-home owners.

3. Middle East-Driven Rate Surge Hits Corporate Bond Market — Over 10 Trillion Won in Issuance Evaporates

- Key Summary: First-quarter corporate bond issuance totaled 34.52 trillion won, down approximately 24% from 45.42 trillion won in the same period last year. Yields on AA- rated three-year corporate bonds surged 75.6 basis points since the start of this year and 57.8 basis points this month alone, reaching 4.215% and significantly increasing corporate funding burdens. In the debt capital markets (DCM) segment, NH Investment & Securities (005940.KS) ranked first in underwriting at 3.75 trillion won, while KB Securities topped deal arranging with 84 deals, though all top-tier securities firms saw underwriting volumes decline 10% to 42% year-on-year. Meritz Securities was the sole exception, posting a 118.78% surge in underwriting volume year-on-year thanks to the establishment of its corporate finance division last year.

4. SpaceX IPO Nears, Sending 'Torrents of Money' Into Space and Aerospace ETFs

- Key Summary: News that SpaceX is preparing for an IPO targeting mid-June this year has triggered rapid capital inflows into space and aerospace ETFs. Over the past week, individual investors poured approximately 45 billion won into KODEX U.S. Space & Aerospace and approximately 8.3 billion won into 1Q U.S. Space & Aerospace Tech. SpaceX is expected to raise approximately $75 billion (about 112.89 trillion won) through the IPO, with a target market capitalization of $1.75 trillion (about 2,634.97 trillion won). Meanwhile, Korea Investment Trust Management plans to launch ACE U.S. Space Tech Active next month, and controversy has emerged over whether indirect investment in unlisted companies through overseas fund-of-funds ETFs circumvents retirement pension regulations.

5. Won Plunges 4.72% in March — Once Again the World's Weakest Major Currency

- Key Summary: Through the 28th of this month, the won's decline against the dollar reached 4.72%, the steepest drop among major currencies. The monthly average exchange rate hit 1,489.3 won, surpassing the March 1998 level of 1,488.87 won during the height of the foreign exchange crisis to reach the fourth-highest on record, with the rate briefly breaching 1,517 won last week. Foreign net selling of KOSPI stocks this month reached a record 29.8 trillion won, with cumulative net selling over two months exceeding 50 trillion won. Analysts suggest that if geopolitical risks from the expanding Middle East conflict and high oil prices persist, the exchange rate equilibrium itself could shift upward to the 1,500 won level.

6. Focus on Infrastructure Firms With Solid Cash Flows — Trillion-Won Mega-Deals Including DIG AirGas

- Key Summary: The first-quarter M&A market was dominated by overseas capital acquiring domestic infrastructure and energy companies with stable cash flows. The largest transaction was the approximately 4.85 trillion won sale of DIG AirGas, completed by France's Air Liquide. Other major deals included KKR's acquisition of SK Group's renewable energy division and a stake in SK Eternix (475150.KS) for approximately 2.5 trillion won. Experts forecast that securing stable investment targets with predictable returns and gaining early positions in the AI value chain will be the key mega-trends in this year's M&A market amid accelerating AI adoption and macroeconomic uncertainty.