KRX launches 5 K-New Deal indices

Korea Exchange (KRX) offices located in Yeouido, Seoul. The nation's bourse operator is launching Korean New Deal indices representing the battery, bio, internet and gaming (BBIG) sectors. / Courtesy of Korea Exchange (KRX)

By Anna J. Park

The nation's bourse operator the Korea Exchange (KRX) launched five new market indices Monday. The move is in line with the Moon administration's emphasis on fostering the country's green and digital sectors over the next five years through its previously unveiled Korean New Deal initiative.

The five newly launched indices represent major companies' stock price changes from the battery, bio, internet and gaming (BBIG) industries.

Out of the five new indices ― KRX BBIG K-New Deal Index, Battery K-New Deal Index, Bio K-New Deal Index, Internet K-New Deal Index and Game K-New Deal Index ― the most encompassing one is KRX BBIG K-New Deal Index, as the index is comprised of 12 companies ― the top three large-cap companies each from the battery, bio, internet and game indices. The other four sectored indices representing the battery, bio, internet and game industries, and consist of the 10 largest-cap companies for each.

The benchmark points of the indices were set on the market capitalization size as of Jan. 2, 2015, as 1,000 points. At Monday's market closing, KRX BBIG K-New Deal Index finished at 3,094.98, down by 1.22 percent from Friday's closing price. KRX Battery K-New Deal Index, KRX Bio K-New Deal Index, KRX Internet K-New Deal Index and KRX Game K-New Deal Index each stood at 3,900.50, 3,540.55, 2,720.55, and 1,336.10 on Monday's closing. During Monday's market, only the bio index logged an increase of 1.84 percent from Friday's trading session.

While the companies included in the indices are subject to change every February and August according to changes in their market caps, the KRX is planning to launch exchange-traded funds (ETFs) based on the indices next month, aiming to further attract floating liquidity into the local stock markets.

Market analysts say the launch of the new indices will further boost the BBIG sectors along with the government-led Korean New Deal initiative.

“In particular, Iljin Materials from the battery sector, SK Biopharmaceuticals from the bio sector, Douzone Bizon from the internet, and Pearl Abyss from the game sector are especially expected to gain further benefits, if the ETFs are set to be on track and to attract the market's floating money,” said Kim Dong-wan, an analyst from Eugene Investment & Securities.

“Given that the game sector's transaction amounts are relatively smaller than the battery, bio and internet sectors, the gaming industry is expected to gain a more positive impact from the indices and the ETFs.”

The KRX hopes the launch of the indices representing the promising industries of the future could raise fresh investor interest in the secondary Kosdaq market as well.

“Among the 40 companies included in the battery, bio, internet and game indices, 19 are listed on the Kosdaq,” an official from KRX said. “The KRX also hopes to serve as a link to draw floating money into the capital market with the introduction of the ETFs.”

In addition, the bourse operator is set to launch a carbon-efficient green new deal index sometime next month, hoping to draw investors' interest in the solar and wind energy sectors.

But some investors are worrying over the efficacy of the indexes, as the CLSA voiced concerns over the Korean government's move to focus supporting on the already fast-growing sectors.

“Together with the KRX's launch of Korean New Deal indices, the Korean government is essentially creating mania for the BBIG sectors which have already been red-hot even without government support,” according to a CLSA report published Monday.