Korea Exchange witnesses economy's ebbs and flows

This file photo shows the opening of Korea Stock Exchange back in March 1956, located in the Myeongdong area of Seoul. / Courtesy of Korea Exchange (KRX)

By Anna J. Park

The nation's bourse operator Korea Exchange (KRX) has witnessed the Korean capital market's growth over the past six decades, assuming a main role in stock trading.

Its official start goes back to March 3, 1956, a little under three years after the Korean War's ceasefire agreement was signed in July 1953, with a new listing of 12 companies, including Chohung Bank ― later acquired by Shinhan Bank ― and Korea Line Corporation, on the opening day.

At that time, the stock exchange was located in the heart of Myeong-dong ― now a popular shopping area in Seoul. Until the stock exchange moved to Yeouido back in 1979, Myeong-dong had long been the country's financial center, explaining why a lot of major banks still have their headquarters in the Myeong-dong area.

During the first twenty years of operation, the local market was highly volatile and unstable due its small size. Having gone through serious fluctuations of stock and bond crises, the stock exchange closed for over two months back in February 1963; it reopened in May in the same year as a state-run stock exchange from a previous corporation system in hopes of regaining public trust.

By 1978, a year before the exchange's official move to Yeouido, the number of listed companies had grown to 356. Samsung Electronics ― the current top market cap company of the Korean economy ― was listed in June 1975.

KRX's move to Yeouido

The file photo shows a groundbreaking ceremony held in 1976 for the construction of the Korea Stock Exchange's new building on Yeouido. / Courtesy of KRX

In 1979, the stock exchange moved to Yeouido, Seoul, heralding a new period for Korea's capital market. As the 1970s saw a massive growth of local economies and companies, stock markets also began to expand further.

The Korea Securities Depository was established as a subsidiary of the Korea Stock Exchange in 1974, when the exchange's official move to Yeouido was confirmed. Since its groundbreaking ceremony in 1976, the stock exchange ushered in a new period on Yeouido from July 1979. The current Financial Supervisory Service (FSS) also relocated to Yeouido in 1978, a year before the stock exchange moved to the area.

However, securities firms had long hesitated to move their headquarters to Yeouido, an 8.4-square-kilometer island in the Han River. Some disliked the newly-created financial district, saying its feng shui was not great; thus, stock orders in Myeong-dong exceeded that of Yeouido until the mid-1980s.

It was only in the early 1990s ― nearly 20 years after its relocation ― that Yeouido earned wide acknowledgment as the new heart of Korea's financial sector. Most brokerage firms relocated to Yeouido, as they felt the need to expand their headquarters in the new financial district for work efficiency amid Korea's high-growth period in the 1980s.

The trading floor of the Korea Stock Exchange back in the 1980s. / Courtesy of KRX

Rapid growth and fall of financial sector in the 1990s

It was not until January 3, 1992 that foreign investors could officially trade stocks at the exchange, raising the composite stock indexes by 2.2 percent on the day. In 1992, foreign investors net purchased about 1.5 trillion won ($1.3 billion) worth of stocks. During the next 30 years, they bought Korean stocks at a net worth of 600 trillion won.

In May 1996, the stock exchange launched a futures market, followed by the secondary KOSDAQ stock market's opening in July the same year. By 1997, the KRX adopted a complete computerization of the trading system. That was the year in which brokerage firms began working on developing the Home Trading System (HTS) using the internet. Based on IT innovations in the late 1990s, current eBest Investment & Securities, Mirae Asset Daewoo and Kiwoom Securities were founded from 1999 to 2000.

But the stock exchange had to witness local financial companies' changing fortunes in the late 1990s with the Korean economy's financial crisis that started in November 1997. Over 16 financial companies closed down, followed by a large number of buyouts. A total of 29 financial companies closed down over the span of a few years; the last closing in 2001.

KRX launched by consolidating KSE, KOSDAQ and KOREX

In January 2005, the Korea Stock Exchange (KSE), KOSDAQ stock market, and the Korea Futures Exchange (KOREX) all merged together into what is the current Korea Exchange (KRX).

Korea Exchange (KRX) building on Yeouido, Seoul / Courtesy of KRX

With continuous innovations to improve its trading platforms and striving to secure stability, the KRX's IT system began to be exported to various countries, including Malaysia, Thailand, Cambodia and the Philippines. Its excellent IT capabilities have helped countries wishing to learn from Korea's stock market systems.

From the 12 listed companies back in 1956, the KRX's number of listed companies now stands at 2,369, as of August this year. For over the six decades, the stock exchange has been the center stage of the Korean economy's growth. Despite its ebbs and flows, it has continued to grow with a daily average trading volume exceeding 30 trillion won and its total market capitalization standing at 1,909 trillion won as of August this year.