Korean Financial Market News for November 14, 2023

1. After the fund invested in the ‘Trianon Building’, one of Germany’s landmark buildings, recorded a loss of more than 80%, investors are taking collective action. If the seller did not sufficiently explain the investment risks in the process of recommending the investment to the investor, the investor is expected to be able to recover part of the investment. This fund was launched in 2018, and the reason it recorded a loss close to the entire amount was due to leverage. IGIS Asset Management set up a fund and raised a total of 370 billion won from investors, and purchased the Trianon Building by borrowing about 500 billion won from a local financial institution. https://n.news.naver.com/mnews/article/366/0000947247
2. As Korea Electric Power Corporation (KEPCO) succeeded in turning a profit for the first time in 10 quarters, it is expected that the stock price, which has been depressed for a long time, will also attempt to rebound. Securities analysts predict that full-fledged performance will improve starting next year due to the recent decision to increase commercial large-capacity electricity rates. Meritz Securities said, “If WTI does not go above $100, performance above the break-even point will be possible,” and added, “The stock price, which fell when oil prices rose, has not yet recovered. This is an area where valuation becomes attractive.” https://n.news.naver.com/mnews/article/003/0012207233
3. Korean Air issued corporate bonds worth a total of 250 billion won at an interest rate of low to mid-5%. Due to the rise in interest rates across the bond market in the second half of this year, the funding interest rate was slightly higher than when it was issued in April. However, at present, the issuance interest rate corresponding to the credit rating 'A+' interest rate has been confirmed, serving as an opportunity to reaffirm the market's favorable view of Korean Air. https://dealsite.co.kr/articles/112885
4. EQUIS, a Singaporean infrastructure investment company, has been selected as the preferred bidder for the acquisition of waste disposal company KC Environmental Services. The subject of the transaction is 100% of KC Environmental Services’ shares. Although the acquisition price amounts to hundreds of billions of won, Equis is believed to have sufficient financial power. Equis counts the world's major pension funds, including the Abu Dhabi Investment Authority and Canada's Ontario Pension Service, as shareholders. https://www.thebell.co.kr/free/content/ArticleView.asp?key=202311131037377000102872&lcode=00
5. Doosan Group's U.S. hydrogen fuel cell company HyAxiom is seeking to raise funds worth 190 billion won through asset securitization loans. Hi-Axiom is seeking to raise funds by receiving a loan through a special purpose corporation and paying ABL, which uses the loan as an underlying asset, to SPC. Currently, Doosan Group is recruiting lenders. The total target amount is 190 billion won, and the funds are planned to be used for research and development and expansion of production capacity. https://www.investchosun.com/site/data/html_dir/2023/11/13/2023111380077.html
6. An assessment was made that the investment attractiveness of domestic office assets, a major commercial real estate sector, is high. This is because, unlike in the United States, the proportion of workers using offices is high and the supply of new buildings is limited. Logistics centers were also identified as a promising sector due to the tendency of domestic consumers to prefer online shopping. Carly Tripp, Chief Investment Officer of Nuveen Asset Management's Real Estate, said at the 'Global Real Asset Outlook' meeting held in Seoul on the 13th, "In the case of Gangnam and Yeouido in Korea, the office vacancy rate is good enough to be around 1%." . Tripp CIO explained, “The strong office market is a unique characteristic of the Korean commercial real estate market that is difficult to find in other countries, including the United States.” https://dealsite.co.kr/articles/112951/075055
7. While it is unclear whether the integration of Korean Air and Asiana Airlines will be completed, Asiana Airlines issued 300 billion won worth of new capital securities (perpetual CB). Asiana Airlines' board of directors approved the corrective action plan that includes the separate sale of the cargo division, and Korean Air fulfilled its promise to provide additional funds to Asiana Airlines through the acquisition of a permanent CB. The interest rate is 4.7%, and the principal and interest can be repaid by exercising the early repayment right (call option) every business day starting one year after issuance. If the call option is not exercised, an interest rate of about 3% will be charged after two years, and after five years, the interest rate will rise by about 50 basis points per year. https://n.news.naver.com/mnews/article/277/0005340167
8. Yuanta Securities predicted on the 13th, “We believe that Korea’s base interest rate hike has ended and a cut is expected to be attempted in 2024, so banking industry profitability will slow down for a while.” KB Financial Group, which has high capital, was presented as the most preferred stock. This is because high capital power can lead to shareholder returns. https://m.businesspost.co.kr/BP?command=mobile_view&num=332839
9. An analysis suggests that Korean apartment prices could fall by up to 30% compared to current prices. Kyobo Securities said, “The importance of interest rates as a major variable in housing price fluctuations is gradually becoming known in the market, but we believe that the actual application of interest rates has not yet been fully reflected in the price.” They added, “We believe that the long-term maintenance of the current interest rate status and the implied rate of return and safe assets are important.” “Considering the inversion of yields, we expect that additional downward pressure of approximately up to 30% from the current price and up to 50% from the peak will continue in the long term,” he said. https://n.news.naver.com/mnews/article/421/0007174058
10. Even if the debut of a major newcomer, Baby Monster, and the Asian tour of Treasure are scheduled, a significant negative growth of YG Entertainment is inevitable, considering that the Blackpink tour took place around this time last year. Samsung Securities said, "It is unfortunate that despite the termination of Blackpink's contract in August, there has been no official announcement as to whether or not the contract will be renewed more than three months later, creating uncertainty," and added, "The priority is to resolve this issue." https://n.news.naver.com/mnews/article/015/0004913739

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