KOSDAQ Separation
The government will separate the Korea Securities Dealers Automated Quotations (KOSDAQ) from the Korea Exchange nine years after integration. The purpose is to create another venture boom by revitalizing the KOSDAQ market.
Many in the industry are welcoming the news. They are expecting that more innovation and tech-oriented companies will be able to enjoy opportunities in the market, so that it can be a better financing channel for small and mid-size enterprises (SMEs) and venture firms. Still, they are also concerned over the feasibility of the policy, because KOSDAQ has to address some issues, such as computing costs, for its independent position.
The KOSDAQ was alive and kicking in the early 2000s amid a venture boom. More than 600 companies were listed there between 1999 and 2004. In 2005, the index gained 84.52 percent, from 380.33 to 701.79 points, to become the fastest-growing bourse in the world. However, both the number of IPOs and the trading volume have plummeted since 2005, when it was incorporated into the Korea Exchange.
Under the circumstances, the Korea Exchange has tried hard to lower the entry barrier. The KOSDAQ Market Division of the organization came up with new rules last year for the listing of large-sized corporations, excluding those with a minimum equity capital of 100 billion won (US$93.9 million) or an initial offering price-based market cap of 200 billion won (US$187.8 million) or more from the group of companies with impaired capital. In addition, the deposit period was halved to six months for major shareholders, and the 3 percent investment obligation for lead managers was exempted. The number of qualitative listing criteria, including business sustainability and transparency, is planned to be cut in half within the first half of this year, too.
Economists and market participants have mixed opinions about KOSDAQ’s independence. Some of them anticipate that the measures will lead to a revitalization of the market through improved capital circulation while facilitating investment by venture capitals. “The investment in the KOSDAQ market will be significantly increased once the regulation limiting a venture fund’s investment in a listed company to 20 percent of the total amount is lifted,” said a venture industry insider.
Nevertheless, there are a series of issues to be dealt with, including how to protect the investors from those that have purposes other than financing. Before the government’s announcement, it was said that the KOSDAQ should be turned into a separate corporate body, but the government turned the call down, mentioning the still-insufficient computing and monitoring capabilities of the segment.