SOUTH KOREAN FIRMS SET TO BLITZ IPO MARKET IN OCTOBER

A string of large South Korean companies is poised to offer shares to the public for the first time in October, as they scurry to take advantage of the rebounding stock market, analysts say.

The initial public offering (IPO) rush comes amid a bullish stock market.

After slumping 40 per cent last year, the benchmark stock gauge Korea Composite Stock Price Index (KOSPI) has surged 50 per cent to the 1,700 level so far this year as the government's stimulus package and economic recovery hopes buoyed investor confidence.

"With the key index widely expected to rise up to the 1,800 mark, now is the right time for firms to go public," Kang Hyun-chul, an analyst at Woori Investment & Securities.

Tong Yang Life Insurance Co., (KSE:003470), the nation's fourth-largest life insurer, will become the first to test investors' appetite for newly offered shares.

From Tuesday, the insurer will receive applications for a 340 billion won (US$286.9 million) IPO in the run-up to the listing of its shares on Seoul's main bourse on Oct. 8. It will become the first local life insurer to go public.

Coming on the heels of Tong Yang's offering are much bigger deals by affiliates of large conglomerates that plan to raise money in a bid to repair their balance sheets.

The POSCO Engineering & Construction Co., (KSE:05490), the building arm of top steelmaker POSCO, is predicted to raise up to 1 trillion won, while system developer SC&C, affiliated with SK Group (KSE:03600), is expected to secure up to 1.12 trillion won, the biggest amount since Korea Electric Power Corp. sold 1.27 trillion worth of new shares in 1989.

Other firms on standby include Jinro Ltd., South Korea's top distilled liquor producer, and Korea Power Engineering Co., Inc., the engineering unit of state power agency Korea Electric Power Corp (KSE:15760).

If all goes as planned, market watchers said, the new deals would galvanize the local IPO market, which came to a virtual halt last year as the U.S.-triggered global financial crisis pummeled stock markets at home and abroad.

The amount of money raised through IPOs sank 69 per cent to 716.8 billion won in 2008 after several firms canceled IPO plans amid a stock market meltdown. POSCO, Tong Yang Life Insurance, and SK C&C are among those that backed away from stock offerings last year.

"Big companies that delayed their IPO plans last year are back in the market as they scrambled to capitalize on the recent stock rally," said Cho Jae-doo, a Korea Exchange official who reviews permission for stock listings.

An expected glut of IPOs, however, is feared to force firms to cut their offer prices and limit the amount of raised money, analysts said.

"Given supply determines stock prices, the massive new stock volume coming at once may result in downward pressures on offer prices," said Cho Kwang-jae, who is in charge of underwriting IPOs at Shinhan Investment Corp.

Still, companies remain eager to tap the IPO market and even accept lower price tags after last year's deep stock price cuts drove down their expectation levels.

"The expected price discount could be taken as costs for going public as long as the offer prices exceed their fundamentals," Cho noted.

Despite concerns over a potential oversupply, experts are optimistic that investors will be able to absorb new shares, given discounted prices and the strong financial status of issuers.

"Their shares may even draw some hefty attention as investors could take this IPO boom as a chance to buy blue-chip shares at relatively lower costs."