Corporate fundraising hits six-year low despite market boom
: Corporate fundraising fell to a six-year low as tighter rules on share issuance limited companies' access to capital despite rising stock prices.
The Lee Jae Myung administration has repeatedly emphasized a "major shift toward productive finance" and moving money from real estate into the stock market as key policy objectives. The idea is that shifting available funds into equities would lift valuations of promising companies, enabling well-regarded businesses to raise capital more easily. This could create a virtuous cycle. Reality, however, has been different.
Corporate fundraising through capital markets this year has fallen to its lowest level since 2020. According to a JoongAng Ilbo analysis of direct corporate financing, companies raised just 36.03 trillion won ($26.7 billion) through stock and corporate bond issuance between January and September, the lowest amount in six years. Equity issuance alone totaled 5.31 trillion won ($3.93 billion), also the lowest over the period.
The stock market boomed in the first half of this year. Normally, rising share prices encourage companies to issue shares through initial public offerings and capital increases. That is how a healthy stock market supports corporate growth. Yet the primary market told a different story.
The government and financial regulators, focused heavily on boosting share prices, tightened oversight of rights offerings and duplicate listings. Critics suggested the measures reflected retail shareholders' concerns that issuing additional shares would dilute existing holdings and depress prices. Companies understandably became reluctant to issue new shares without considering regulators' reactions.
Admittedly, excessive corporate spin-offs, controversial subsidiary listings and indiscriminate share issuance have contributed to the Korea discount, the persistent undervaluation of Korean stocks. But excessive regulation creates its own problems.
Issuing additional shares increases the supply of stock, but it can also strengthen corporate balance sheets and improve long-term competitiveness. Regulators went too far by intervening in decisions investors should make after assessing management's plans for using the newly raised capital.
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Assuming that restricting the primary market will strengthen the secondary market is equivalent to missing the forest for the trees. Both markets must function properly for companies and investors to benefit.
When stock markets fail to provide sufficient financing, businesses must borrow from financial institutions at higher interest rates. Rising financing costs eventually undermine their competitiveness. And when companies lose their capacity to invest and expand, the stock market itself loses vitality.
The purpose of productive finance should not simply be to push stock prices higher. It should ensure that capital reaches companies capable of generating future growth. Investors willing to accept risks must have opportunities to finance corporate investment through an active capital market.
That is how the stock market can fulfill its essential role as a financial intermediary and contribute to Korea's economic growth.
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