Definition
The term kimchi bond refers to an indenture issued in South Korea, in a non-won denomination, by a foreign bank or corporation. Kimchi bonds are issued to raise dollars for settlement with trade partners in the United States.
Explanation
Foreign corporations that wish to raise funds in South Korea have the option of issuing what are known as kimchi bonds. These bonds are sold by non-domestic entities, including corporations, financial institutions and governments, and are issued in a non-domestic currency. Arirang bonds are also issued by foreign entities in South Korea; however, they are won-denominated securities.
Kimchi bonds are attractive to South Korean investors interested in holding debt that is issued in a non-domestic currency. However, whenever an investor purchases a security that is issued in a foreign currency, they are taking on an exchange rate risk.
Kimchi is a popular traditional South Korean side dish. There are many varieties of kimchi, since it is prepared using seasonal vegetables.
Related Terms
The term Formosa bond refers to an indenture issued in Taiwan, in a non-New Taiwan dollar denomination, by a foreign bank or corporation. Formosa bonds are one of several ways for multinational companies operating in Taiwan to raise capital.
Moneyzine EditorJanuary 18th, 2024- The term Uridashi bond refers to an indenture issued outside of Japan, in a non-yen denomination, and sold to Japanese investors. Uridashi bonds are issued when there is a significant yield differential between the foreign and local currency.Moneyzine EditorSeptember 21st, 2023
- The term shogun bond refers to an indenture issued in Japan, in a non-yen denomination, by a foreign bank or corporation. Shogun bonds are one of several ways for multinational companies operating in Japan to raise capital.Moneyzine EditorSeptember 21st, 2023
- The term shibosai bond refers to an indenture privately placed in Japan, in Japanese yen, by a foreign bank or corporation. Shibosai bonds are issued when a corporation wishes to raise capital from private investors located in Japan.Moneyzine EditorSeptember 21st, 2023
The term Eurobond refers to an international indenture issued in a non-domestic currency. Eurobonds allow issuers to raise funds, while selecting the country to offer their bond based on that country's regulatory environment.Moneyzine EditorJanuary 17th, 2024
