By Yoon Ja-young
A growing number of foreign companies are preparing to list their shares on the Korean stock market.
The moves come as the Seoul bourse has advantages in abundant liquidity and good evaluation.
According to the Korea Exchange (KRX), the country’s stock market operator, around 10 foreign companies are preparing for an initial public offering (IPO) on the Seoul bourse.
“Two Chinese companies are set to hand in applications for listing this year,” said Kim Jong-il, a manager in charge of foreign companies at the KRX. He added that Heng Sheng Group, an animation company, and a pharmaceutical company specializing in cosmetics for atopic dermatitis, are ahead of others in the listing procedure.
Among the others preparing to get listed are Philippines BXT, a leisure company; Content Media, a U.K. content company; Tong Ren Tang, a Chinese pharmaceutical company; and M-Biz Global, a Swiss mobile software company. An Indonesian home-shopping company and an Australian female garment company are also looking at the Seoul bourse.
Currently, there are 15 foreign companies ― from China, the United States, Japan and Laos ― listed on Korean stock market. Four of them are on the main KOSPI while the other 11 are listed on the tech-heavy KOSDAQ.
Kim said it takes longer for foreign companies to get listed. “While one year would be enough for a local company, it takes longer for foreign companies as commercial and corporate laws differ from country to country. It takes time for them to change their corporate system to suit ours.”
However, Seoul is very attractive for foreign companies seeking an IPO, according to Kim.
“Everybody knows the NASDAQ or NYSE, but they are focused on major global companies like Apple and Microsoft. Small companies with less than 1 trillion won in sales don’t get the spotlight. These stocks won’t enjoy much trade,” he said.
“Korean investors, meanwhile, are as much interested in small and medium-sized companies as big ones. That is a huge attraction for those companies,” he added, pointing out that small companies also get media coverage and analysis by securities companies here, which they are not likely to get had they been listed on the NASDAQ.
He cited biotech companies as examples. “In the case of biotech companies, they are the most highly evaluated on the KOSDAQ. The bio sector is known to have good valuation, but in fact it is much higher on the KOSDAQ. I can definitely say that the Seoul bourse is much more favorable for small- or medium-sized bio companies,” he said.
Low listing costs are also a strength of the Korean bourse. Listed companies have to pay fees to the bourse operators, as well as shoulder legal and auditing fees, but the total cost can be as small as 5 percent of that in the United States, according to Kim.
For Korea, meanwhile, these foreign companies can create great economic value. He cited Access Bio, a U.S. company that manufactures medical diagnostic devices, as an example.
“The company grew a lot after its IPO in Korea. It is building a research and development center in Magok in western Seoul, and is scheduled to hire around 50 researchers,” Kim said.
He added that as Koreans hold shares of these foreign companies, they will get dividends as well as capital gains when these companies grow.
The KRX is scheduled to hold road shows in New York and San Francisco in October to attract more foreign companies.