Bloomberg News

Woori Sees Korean IPOs Increasing 8% in 2012 on Won Advance

December 28, 2011

(Updates with comment from Jeong in eighth paragraph.)

Dec. 23 (Bloomberg) -- South Korea’s initial public offerings may increase about 8 percent next year as “ample” global money supply and a possible strengthening of the won draw investors to the nation’s assets, according to the country’s biggest IPO underwriter.

Companies may raise about 4 trillion won ($3.5 billion) in IPOs in South Korea in 2012, Jeong Young Chae, head of Woori Investment & Securities Co.’s global investment banking division, said in an interview in Seoul yesterday. That compares with 3.7 trillion won raised so far this year, according to data compiled by Bloomberg. A stock rebound this week following the death of North Korean leader Kim Jong Il shows geopolitical risk won’t deter investor appetite, he said.

“Abundant global liquidity bodes well for next year’s IPO market outlook, while there won’t be much to expect from economic conditions,” Jeong said. “The won is also one of the most undervalued currencies, and an expected appreciation could benefit overseas investors.”

The won lost 7.1 percent versus the dollar in the past six months, the second-worst performer among Asia’s 10 most-traded currencies. A stronger currency would boost the value of won- denominated assets for foreign investors when repatriated. The European Central Bank said this week it will lend euro-area banks a record amount for three years in its latest attempt to keep credit flowing amid the region’s debt crisis.

Money raised in South Korean initial equity offerings has more than halved this year from 2010’s record 10.3 trillion won. Last year’s tally was boosted by Samsung Life Insurance Co.’s 4.9 trillion won sale.

Top Underwriter

Seoul-based Woori topped the South Korean IPO underwriter rankings this year, rising from eighth in 2010, as it advised on initial share sales by Korea Aerospace Industries Ltd., the country’s largest planemaker, and GS Retail Co., the nation’s No. 2 convenience-store operator, according to data compiled by Bloomberg. Korea Aerospace has more than doubled from its IPO price, while GS Retail rose 4.4 percent from its IPO price to 20,350 won at 10:46 a.m. on its trading debut today, compared with the benchmark Kospi index’s 1.1 percent gain.

Next year’s IPOs will include Hyundai Oilbank Co., the country’s fourth-biggest refiner, and LG Siltron Inc., which makes silicon wafers, Jeong said. Woori will lead the Oilbank sale, which may allow the brokerage to retain the top position among underwriters next year, he said.

The Kospi index has fallen 8.9 percent this year as Europe’s sovereign debt crisis raised concerns that the nation’s overseas shipments will slow. That compares with a 20 percent drop in the MSCI Emerging Markets Index and an 8.3 percent decline in the MSCI World Index, a gauge for developed markets.

Kim Jong Il

South Korea’s economy, Asia’s fourth largest, will grow 3.7 percent in 2012, the slowest pace in three years amid global economic weakness, the country’s finance ministry said on Dec. 12. The nation has so far seen little impact to its economy since the death of Kim Jong Il, Deputy Finance Minister Kang Ho In told reporters two days ago in Seoul.

The Kospi slipped 3.4 percent, the most in five weeks, on Dec. 19 after Kim’s passing sparked concerns over succession in North Korea. The stock index has rebounded 4 percent since then. Overseas investors purchased a net 329.9 billion won ($287 million) of shares in Kospi companies on Dec. 21, the most in three weeks, according to Korea Exchange Inc. data.

“The quick bounce-back shows the South Korean market is resilient to risks from the North,” said Woori’s Jeong. “Investors have already learned a lot from past experiences so they have confidence in fundamentals of our economy.”

--Editors: Darren Boey, Philip Lagerkranser

To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Seonjin Cha in Seoul at scha2@bloomberg.net;

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net Chitra Somayaji at csomayaji@bloomberg.net;


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