By Choi Sung-jin
Korea’s stock market celebrates its 60th birthday Thursday.
The Korea Exchange (KRX), which started as the Korea Stock Exchange (KSE) with 12 listed companies on March 3, 1956, has had numerous ups and downs over the past 60 years.
In the 1980s, the Korea Stock Price Index, or KOSPI, exceeded 1,000 points thanks to rapid economic growth and capital market expansion. But in the late 1990s, it suffered great damage as Korea experienced a severe currency crisis. In 2008, it had another rough time, swept by the global financial crisis.
After many twists and turns, the domestic stock market has grown to be the 13th-largest in the world in aggregate market value. The number of listed companies and average value of share turnover have also expanded beyond comparison with the early days.
According to the KRX, its aggregate market value was 1,207.46 trillion won ($977.7 billion) as of Jan. 31. Compared with the capitalization of 15 billion won in 1965, that represents an expansion of 82,895 times. The average daily trading value has also rocketed to 4.77 trillion won, 150,000 times larger than the 31 million won in 1965. The number of listed enterprises has jumped 45 times over the past 50 years, from 17 to 769.
What has changed is not only its size but its composition. Foreign investment has drastically increased. In 1992, the share of foreign investment was 4.9 percent of the total, but the portion surged to 31.9 percent last year.
In 1995, Korea Electric Power Corp. was the company with the highest market value, followed by Samsung Electronics, Pohang Iron and Steel, Korea Mobile Telecom and Daewoo Heavy Industries. Now, Samsung Electronics tops the list, chased by state utility KEPCO, Hyundai Motor, Samsung C&T, Hyundai Mobis and SK Hynix.
The bourse began to grow in earnest upon the turn of the 1980s. The KOSPI, which remained at 118.27 in 1983 when authorities changed the composite price index to reflect shares’ market capitalization, jumped nearly 10 times in just six years to reach 1,003.31 in 1989. In 1996, the stock index futures market opened and, reflecting the rising investment in technology shares, the KOSDAQ market opened later in the year, followed by the stock index options market in 1997.
The biggest crisis came in 1997, when an unprecedented financial crisis hit the nation. The KOSPI, which had maintained the 700-point level before Korea went to the International Monetary Fund (IMF) to request bailout funds, plunged to 200 in June 1998. It was in the 2000s that the bourse regained its vigor, riding on the IT industry boom and simultaneous recovery of exports and domestic consumption. The KOSPI broke the 2,000-point landmark in 2007, fell below the threshold in 2008 and has since hovered between 1,800 and 2,000.
More recently, the stock market has evolved through opening new markets and making overseas advances. It established KRX in 2009 by integrating stock, bond and futures markets. In 2010, it took the first step toward overseas expansion by acquiring a 45- percent stake in Cambodia’s exchange, and took up a 49-percent equity share when Laos opened its stock market.
In 2012, an e-commerce oil market opened within the KRX, followed by that of the Korea New Exchange (KONEX) market for promising but yet-to-be listed firms, in 2013. Since 2014, it has also opened a gold market, an extrude trade note (ETN) market and a carbon emission reduction market.
But the KRX’s plan to grow through expansion into overseas capital markets recently hit a snag. Initially, the KRX planned to transform itself into a holding company and be listed on the stock market, with the aim of advancing to capital markets in emerging countries through exchanging equity with foreign bourses.
From a revised bill that passed the National Assembly recently, however, the provision on KRX’s conversion into a holding company was omitted, making it difficult for its listing plan to get off the ground.
“The growth of the stock market is stagnating again because of the exit of foreign investors and the global economic slump,” a KRX official said. “For the domestic capital market to grow one notch higher, its conversion into a holding company and going public are essential.”