Direct financing by South Korean companies shrank 9.3 percent in the first half as firms remained reluctant to raise money in bond markets on yield hikes following the U.S. signaling it would cut its stimulus, the financial regulator said Monday.

Local companies raised a total of 59.9 trillion won (US$53.4 billion) in the January-June period by selling stocks and bonds, compared with the 66.1 trillion won a year earlier, according to the Financial Supervisory Service (FSS).

In June, however, corporate direct financing soared 17.2 percent on-month to 10.4 trillion won, due to an increase in rights offerings and issuance of asset-backed securities (ABSs), it added.

The first-half decline came as companies refrained from securing funds through selling corporate bonds as they saw yield hikes after the U.S. Federal Reserve indicated it may start winding down its bond purchase program later this year.

Corporate bond issuances fell 10.7 percent to 58.2 trillion won over the cited period, with the first-half figure for June hitting an all-time low of 2.17 trillion won.

But companies' stock sales almost doubled to 1.77 trillion won in the first half, from 914 billion won a year ago, as more firms opted to raise money via offering shareholders rights to issue new shares.

Corporate direct financing in Korea has slowly begun to pick up since the beginning of this year compared with the previous year, but its growth lost steam in May and June, weighed down by the Fed's possible unwinding of the monetary easing, the FSS said.

In a bid to revive the faltering corporate bond market, the government in early July rolled out a plan to provide 6.4 trillion won to help local companies raise funds through bond sales, in which state-run lenders will purchase low-rated bonds and give a government guarantee for firms to reduce borrowing costs. (Yonhap News)