A man walks by a display showing the Kospi and Kosdaq figures in the trading room of Hana Bank in Jung District, central Seoul, at market close on May 13. [YONHAP]
As Korea's main bourse charges ahead on an unprecedented bull run, the tech-heavy secondary market is languishing as listed companies and retail investors leave.
The Kosdaq Listed Companies Association, the Korea Venture Business Association and the Korea Venture Capital Association urged “leading Kosdaq-listed companies to remain in the market and help preserve both the innovation ecosystem and investor confidence," in a joint statement released on Wednesday.
The appeal came after Alteogen, the second-largest company on the Kosdaq by market capitalization, revealed plans to move to the Kospi within the year.
“The Kosdaq is not simply a fundraising market, but a platform where innovative venture companies can grow,” the association stated. “The departure of leading companies inevitably weakens the market’s investment appeal and foundation of trust while negatively affecting the broader innovation ecosystem.”
A total of 59 companies, such as Celltrion, Naver and Kakao, have moved from the Kosdaq to the Kospi so far, pulling a combined market cap of 165.91 trillion won ($111.26 billion), equivalent to about 25 percent of the secondary bourse's total market value.
The repeated transfer of major Kosdaq-listed companies to the Kospi has long been considered a key factor undermining investor confidence in the index.
Stock prices are displayed at a screen in the Korea Exchange PR Hall in Yeouido, western Seoul, on Feb. 2. [YONHAP]
In response, financial authorities are pushing to introduce a two-tier system for the Kosdaq to discourage such moves. The proposed structure would place established blue-chip companies in a first division and growing firms in a second division, giving companies differentiated market value while remaining within the Kosdaq.
Companies, however, still have little incentive to remain on the Kosdaq.
“Passive fund inflows after a transfer listing to the Kospi are believed to be about 10 times larger than when a company remains on the Kosdaq,” a representative at a Kosdaq-listed company stated. “A transfer listing is not something a company can decide independently, because shareholders strongly demand it as a way to improve corporate value.”
A person holds a tablet showing a financial chart and points at it with a pen. A laptop in the background displays stock market graphs, while printed financial documents rest on the desk. [SHUTTERSTOCK]
"Decisions over which market a company is in should ultimately be made by the company and its shareholders,” Kim Sang-bong, a professor at the Department of Economics at Hansung University, said. “It is more important to improve technology, operating profits and overall competitiveness than to rely on policy effects to fundamentally revitalize the Kosdaq.”
The loss of big market cap firms is compounded by signs that retail investors are also leaving the Kosdaq.
Individual investors sold 752.4 billion won worth of the Kodex Kosdaq 150 exchange-traded fund (ETF) over 25 consecutive trading sessions, according to the Korea Exchange.
Over the same period, retail investors poured 448.8 billion won into the Kodex 200, an ETF that tracks the Kospi index on the back of the main bourse's continuing rally.
Employees of Hana Bank celebrate to mark the Kospi topping 7,000 points in a trading room of Hana Bank in Seoul on May 6. [AP PHOTO/YONHAP]
The Kospi closed at a record high of 7,844.01 on Wednesday, up 2.63 percent from the previous session. The Kosdaq fell 0.2 percent to 1,176.93 on the same day. The Kosdaq has effectively stalled for more than two decades since its benchmark was reset to 1,000 in 2004.
The Kospi has risen 86.13 percent so far this year, while the Kosdaq has gained only 27.17 percent.
Some analysts believe the Kosdaq can still rebound with government efforts to revitalize the market.
“The Kosdaq includes semiconductor materials, parts and equipment companies positioned to grow alongside the AI ecosystem being built by Samsung Electronics and SK hynix, as well as biotech and secondary battery firms viewed as major future industries,” said Yong Dae-in, head of research at IBK Investment & Securities. “Government policies expected to gain momentum in the second half of the year could serve as a catalyst for renewed investor interest.”
The emblem of the Financial Services Commission [YONHAP]
Meanwhile, the government is accelerating efforts to weed out underperforming companies listed on the Kosdaq as part of a bid to revitalize the secondary market.
The Financial Services Commission approved revisions to listing regulations on Wednesday as part of a delisting reform plan aimed at speeding up and tightening the removal of troubled companies from the stock market.
Key measures include raising the market capitalization threshold for delisting, introducing new requirements targeting penny stocks along with anticircumvention measures, strengthening standards for disclosure violations and adding new criteria related to capital impairment in semiannual reports.
The tougher rules on penny stocks and disclosure violations will take effect on July 1.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
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