Korea Investment & Securities is making a push into the offshore market, connecting bond issuers from around Asia with liquidity from South Korean investors.
The unit of Korea Investment Holdings this year won roles on bond deals from Greater China, the Philippines and Mongolia.
The group wants to stay relevant to global issuers, investors and intermediaries, make additional revenue outside of Korea and source products overseas to sell to Korean retail and institutional investors, said a spokesperson for Korea Investment Holdings.
“The offshore bond business ticks all the boxes above and we will consider it successful if we can achieve the above points (and we have done so this year to date),” the spokesperson said.
KIS has built up a team of around 30 in Hong Kong and also has offices in Singapore, Indonesia and Vietnam.
“The beauty of working with a Korean firm right now is the high liquidity,” said Jooyoung Kim, head of global fixed income investments and investment banking division at KIS Asia. “We have a mission to originate global deals and see if Korean retail investor interest will grow.”
Kim joined in November 2023 after more than six years at Credit Suisse, where he was a director on the debt capital markets team.
The Swiss bank's demise after being taken over by UBS last year has left gaps in the market that KIS can leverage. For instance, Credit Suisse was one of the top arrangers of Asian high-yield bonds, but UBS has shown less risk appetite.
“They specialised in some high-yield credits and often provided commitment for primary deals. They had a huge private bank network,” Kim said. “There are definitely back-up players who can provide commitment on primary and for certain situations, we want to play to fill the gap.”
In 2021, Credit Suisse was a joint bookrunner when Philippine property company Vista Land & Lifescapes printed a US$170m tap. When Vista Land returned to the offshore bond market for a US$300m issue in July this year, KIS was a bookrunner while UBS was absent from the ticket.
In May, KIS was a bookrunner when Mongolia's Golomt Bank sold a debut US$300m senior bond.
“I can leverage my network, but KIS is not known [outside of Korea] and is in the process of building its global reputation,” said Kim, who worked for Citigroup in Hong Kong for six years before joining Credit Suisse.
The firm has no immediate plans to add headcount outside Asia, Kim said.
“The great thing about a small team is the flexibility and efficiency. We can move quickly,” he said.
Risk management
Still, the firm is aware of the need to balance expansion with risk management.
“We are cautious about all risks associated with this business including defaults, markets and credit events, and we have a proper risk monitoring system to control this,” said Korea Investment Holdings' spokesperson. “Also, we are not just focused on HY and we diversify our footprint in IG and syndicated loans as well to mitigate risks and diversify revenue sources.”
KIS was a joint bookrunner on Guotai Junan Securities’ US$400m issue in June. It was also a co-manager on CLP Power Hong Kong’s three-year debut Kangaroo bond offering in July, alongside joint lead manager KDB Asia, marking the first time Korean institutions helped lead an Australian dollar bond offering for a Hong Kong issuer.
In June, it was also co-investor and co-lead arranger for a private debt financing for North American airline Porter Aviation Holdings to help fund development of the first commercial aviation terminal at Montreal Metropolitan Airport.
KIS sometimes buys unsold securities when a deal is not covered. “It is very natural for a firm like us to recycle the limited capital we have. If we see an opportunity to sell in the secondary market, then we do so,” Kim said.
KIS's push into offshore markets comes at a time when its parent company has also increased its share of the Korean onshore bond market. So far this year Korea Investment Holdings has recorded deal volume of about W17.5trn (US$13.5bn) from 243 deals, almost as much as 2023’s full-year figure of W17.7trn, according to LSEG data.
Still, prospects for growth in the onshore bond business are a “bit limited given how mature the market is now,” according to the spokesperson.
Kim said KIS’s next key markets of focus offshore are Indonesia and Vietnam – traditional strongholds for Credit Suisse – and it will gradually expand its footprint after that.
“The Korean local press is also talking about our deals. And for the first time, these issuers are getting airtime in Korea,” he said. “We see repeat issuers in our pipeline. If the second half of the year is as good as the first half was, that will be great.”