Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Newly listed stocks' fluctuations increase with higher price cap rule
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By Anna J. Park
New rule allows up to four-fold offering price increase
By Anna J. Park
With the implementation of the new higher price cap rule applying to newly listed stocks starting last week, stocks that went public this past week have shown rollercoaster-like fluctuations.
According to the Korea Exchange (KRX), the country's bourse operator, the higher price limit rule that took effect on June 26 allows prices of newly listed stocks to rise within a range of 60 percent to 400 percent from an offering price on the day of listing.
Previously, it had a more complicated system of determining prices on a stock's listing day. While the upper daily limit for the newly listed stocks was de facto 260 percent from the offering price of listing stocks, it had to follow a two-step procedure. The starting set price at the opening of a trading session shall be determined at between 90 percent and 200 percent of the offering price, which is then subject to normal price change limits of plus-minus 30 percent.
The new rule does not follow the two-step procedure but rather just starts from an offering price, which could change between 60 percent to 400 percent on the day of a stock's listing debut.
Secucen, a security firm that offers security solutions such as biometric authentication and digital signature services, was the first company affected by the new price cap rule. It went public on Thursday, finishing at 9,150 won ($6.94), a 205 percent increase on the day of its Kosdaq debut. The stock price once rose by 293 percent during the first trading session, which is the highest intra-session increase rate ever in the history of Korean stock markets. Yet the price of Secucen fell by 15.63 percent on the second day of its listing.
Aluminum extrusion business ALMAC, which went public on Friday, also showed higher fluctuations in its price move. It finished the first listing day with 99,500 won, a rise of 99 percent from its offering price. During the session, it once reached 180,000 won, a 260 percent increase from the offering price.
Openknowl, an education and employment platform company, which also made its Kosdaq debut on the same day as ALMAC, showed drastic price moves. Its stock price soared to 30,950 won, a 209 percent rise from the offering price, within an hour of trade opening. But it nosedived during the afternoon hours, finishing at 15,750 won, a 57 percent increase from the offering price.
With the wider price ranges allowed for newly listed stocks, the number of transactions also skyrocketed, drawing in day traders or high-frequency traders. Openknowl took the top place in terms of the total amount of transactions in the Kosdaq market on the day of its listing. Secucen was also ranked first in terms of the Kosdaq's total amount of transactions on Thursday, its listing day.
As listing stocks' rate of returns becomes widely different even within a single daily trading session, depending on when an investor decides to sell them, investors are advised to take more caution in monitoring the number of transactions and price moves in determining the time for sell. The rate of return of ALMAC, for instance, varied from 99 percent to 260 percent, on Friday's session, depending on an investor's sell time.