Market Shift

 

In a recent survey conducted by a local economic daily, more than half of KOSDAQ-listed companies answered that stock market instability would increase and their business conditions would deteriorate when the KOSDAQ is separated from the Korea Exchange as intended by the financial authorities. A total of 47 KOSDAQ companies participated in the survey, 10 of them with a market cap of at least 900 billion won (US$804 million) .

The KOSDAQ merged with the Korea Exchange and the Futures Exchange in 2005, and the authorities are now looking to separate it as an independent corporation. The idea is to facilitate listings so that more venture firms can have access to it.

Still, 11 of the respondents said that their business conditions would be somewhat affected by the division, and three answered significantly. Eight of them were optimistic about the measure, while only one was highly positive about it. In addition, more than half of the other 24 expressed concerns.

“An alteration for the purpose of venture capital attraction, including easier listings and membership maintenance, could result in a decline in the reliability of the listed firms,” one of them mentioned, adding, “Then, business could be more affected than before in the event of a scandal.” Another one pointed out, “KOSDAQ has achieved quantitative and qualitative growth and improved its soundness since the consolidation, which means that the separation is unnecessary.”

In particular, six out of the 10 blue chips and one out of the rest answered that they would mull over moving to the KOSPI immediately after the separation. Even five of those that answered the other way around added that they would consider the same way if market instability rose after the division. Back in 1996, 96 companies such as NCSoft, LG Telecom, and NHN moved to the KOSPI after the opening of the KOSDAQ, and the competition between the bourses that the government looked for did not happen.

Thirty-five companies said that they saw the separation as inappropriate for the government’s goal, that is, the revitalization of venture capital the inflow of more investment into small and venture firms. “KONEX has already been established to that very end,” one of them said, continuing, “It seems that the separation of KONEX, attraction of more individual investors into the bourse, expansion of indirect investment products in it, and tax incentives for KONEX investors will do more good.” The market capitalization of the KONEX, which stands for Korea New Exchange, has increased from 923.4 billion won (US$825.2 million) to 2.5216 trillion won (US$2.2536 billion), and the number of companies listed on it from 45 to 75, between 2013 and this year. 

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