Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
30 years on, Kosdaq struggles to regain investors' trust
Korea Exchange Chairman and CEO Jeong Eun-bo, fourth from left, Financial Services Commission Chairman Lee Eog-weon, fifth from left, and other industry officials celebrate Kosdaq’s 30th anniversary at Conrad Seoul hotel in Seoul, Wednesday. Yonhap
By Lee Yeon-woo
As Kosdaq marks its 30th anniversary on Wednesday, the government is moving to weed out marginal firms and promote higher-quality companies in a broad overhaul aimed at restoring investor confidence.
During a ceremony held at Conrad Seoul hotel, Korea Exchange (KRX) Chairman and CEO Jeong Eun-bo reaffirmed plans to structurally reform the junior tech-heavy market.
"The buildup of marginal companies has weighed on the broader market's valuation and made it vulnerable to unfair trading practices," Jeong said. "The goal is to replace weaker firms with innovative technology companies and help them grow into stronger listed businesses."
Starting Wednesday, the market capitalization threshold for delisting will be raised to 20 billion won ($12.9 million) from the current 15 billion won. Penny stocks trading below 1,000 won will also become eligible for delisting. KRX expects the tougher rules to sharply increase the number of delisted companies, from eight in 2023 and 38 last year to about 88 this year.
Another proposal calls for a "promotion-and-relegation" system, under which the market would be divided into three tiers: premium, standard and watch list. Companies with strong growth prospects and financial stability would be selected for the premium tier and offered benefits, giving them less incentive to move to the benchmark KOSPI.
Financial Services Commission Chairman Lee Eog-weon said the government plans to strengthen support for the growth and listing of innovative companies.
Kosdaq was launched in 1996 as Korea's answer to Nasdaq, with 341 listed companies and a combined market capitalization of 7 trillion won. As of January, the market had 1,827 companies with a combined market capitalization of 600 trillion won.
Yet the index has yet to reclaim its initial level. After peaking during the venture boom in 2000, it fell below its opening level of 1,000 on July 1, 1996, closing at 929.35 on Wednesday.
Analysts have long argued that Kosdaq's low profitability and large pool of loss-making companies have left it vulnerable to speculative trading, keeping investor confidence fragile.
The exit of major names such as Naver, Kakao and Celltrion to KOSPI has added to the pressure, as companies seek deeper pools of investment capital. Without those transfers, analysts estimate the secondary bourse would now be around 1,700 points.
KOSPI's recent strength has pulled retail investors further away from Kosdaq, once their mainstay, as they pile into chip stocks benefiting from the artificial intelligence boom. The domestic exchange-traded fund market even overtook Kosdaq in market capitalization for the first time on June 23.
Choi Yoo-joon, a researcher at Shinhan Financial Group's Future Strategy Research Institute, said revitalizing Kosdaq has long been a recurring policy goal for many administrations. Yet repeated efforts have fallen short of improving the market's underlying structure, allowing the index to stage only brief rebounds that have proved difficult to sustain.
While the latest policy differs from previous attempts by explicitly calling for tougher delisting requirements, Choi said Kosdaq risks repeating past disappointments unless authorities take concrete steps to prevent leading companies from leaving the market.