Securities firms pay more attention to OTC market

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By Lee Kyung-min

A growing number of securities firms are paying more attention to Korea's over-the-counter (OTC) market, where shares of unlisted firms are traded, invigorated by the soaring popularity of the equity market amid the COVID-19 pandemic, coupled with a rapid saturation of the brokerage business.

Also driving the growth of the OTC market are heavy regulations on financial investment vehicles such as real estate project financing, prompting brokerages to diversify sources of stable income.

The rush is explained in part by their efforts to seek more initial public offering (IPO) opportunities involving soon-to-be listed firms with high growth potential.

KB Securities plans to issue in-depth reports on the growth prospects of promising firms, mostly privately held startups in the e-commerce, mobility, fintech, bio and green energy businesses. It issued a report on Musinsa, a fashion goods platform, early this month.

Up to 70 unlisted firms were analyzed by Samsung Securities this year, a growth strategy backed further by monthly forums since January for investors seeking to buy into unlisted companies. Customers include venture capital firms and institutional investors, as well as individual retail investors.

At least one or two weekly issues on the analysis of unlisted companies by DB Financial Investment are available. About 80 unlisted firms have been included in the analysis since 2019. DB is the first local securities firm that regularly publishes such reports.

The market capitalization of Korea's OTC market stood at over 33.5 trillion won ($28.3 billion), Wednesday, nearly doubling from 17 trillion won early this year.

The number of users of unlisted stock trading platform Utockplus, operated by Dunamu and Samsung Securities, exceeded 700,000.

The OTC market is expected to grow further, since individual retail investors dissatisfied by the small number of stocks available through public subscription will seek to buy a large number of shares in the pre-IPO market.