Investors in South Korea pay record fees for equity underwriting

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HONG KONG SEOUL, Aug 17 - Investment banks in South Korea pocketed record fees for equity underwriting this year thanks to a boom in initial public offerings data - and bankers are betting a buzzing deal pipeline means a continued near-term surge.

The total fee pool for 2021 equity capital market deals in South Korea is now equivalent to $315.5 million, according to Refinitiv data. Of this, $236 million has been brought back from the record Number of Seoul listings in 2021.

Fees shown so far this year have already surpassed the full 2020 total and the amount is more than double that earned in 2019, shows the data show. The previous fee record, year to date, was $178.6 m in 2006.

Some $17.25 billion was raised via IPOs this year - already four times the amount of 2020, with Krafton's $3.7 billion https: www.reuters.com technology skoreas-krafton - maker-hit - game-pubg - tumbles-debut - 2021 - 08- 10 IPO the largest this year followed by KakaoBank - become-skoreas - biggest-lender - investor - by market - value-tellar

That's before the mouthwatering prospect for investment banks of what is likely to be South Korea'sKorea's largest ever IPO later this year - LG Energy Solution, part of the LG conglomerate, is due to raise between $10 billion and $12 billion.

The greatest amount of money that flowed to the stock market, with reference being particularly in the IPO market, is from retail investors, said Joseph Kwon, director of ECM at Citigroup, reckoning the amount of money that is currently deposited in brokerage accounts is estimated to be approximately 70 trillion won - enough to continue to underpin the market.

The windfall is a welcome relief for both domestic and Wall Street bankers. Seoul is a market that pays fees of about 1% of the IPO proceeds, compared with about 2% in Hong Kong and more than 4% for floats in the Nasdaq-style Market of Seoul.

Enthused by the ascending deals volume and fee pool, Daishin Securities employed about 10 bankers this year to take its total workforce to 38 and is looking to add more in the near future, said Youseok Nah, managing director of Daishin Securities Group.

Daishin switched from 10th among regional banks last year in the country's ECM fee league table to sixth currently, Refinitiv data showed.

South Korea had never seen so much direct investment in IPO stocks by retail investors, particularly those in their 20 s - 30 s, until last year when the stock market rebounded from the COVID - 19 shock in early 2020 drew people's attention, Nah said.

The booming IPO activity has also boosted prospects for foreign investment banks and venture capital funds. Under domestic regulations, they have to partner with a local bank to manage IPOs in Asia's fourth largest economy.

You will see the activity level elevated compared to where it has been historically and a continuation of Korea's capital markets more active, said Gregor Feige, JPMorgan co-head of Asia excluding Japan, ECM.

Big listings like HYBE Co Ltd, manager of global boy band phenomenon BTS, and E-commerce giant Coupang Inc in the United States have sharpened global investor focus on Korea, Feige said.

Global banks with their overseas networks are typically better positioned to tap large foreign investors for equity issuance.

As a result, JPMorgan and Goldman Sachs were leading the ECM fee league table in South Korea for the first time in three years after local banks dominated those places since 2018, the Refinitive data showed.

What we are seeing is unique. The broadest set of companies currently enter the market after having prepared and waited through the initial phases of the COVID pandemic, according to David Chung, Goldman's head of Korea Investment Banking.