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🇰🇷 South Korea /Economy & Trade

KOSDAQ Turns 30 Amid Stagnation, Plans Market Tiering to Shed 'Minor League' Image

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

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  • The KOSDAQ market, launched 30 years ago as Korea's Nasdaq, is stagnating below its benchmark index while the KOSPI thrives.
  • The exchange plans to delist underperforming companies and introduce a tiered market system to improve KOSDAQ's reliability and attract institutional investors.
  • These measures aim to shed the 'minor league' image and boost the valuation of quality companies.

Thirty years after its launch as South Korea's answer to the Nasdaq, the KOSDAQ market is struggling, trading below its benchmark index while the main KOSPI market experiences unprecedented growth. The KOSDAQ, established on July 1, 1996, to serve as a funding platform for small and venture companies, has seen its index decline 1.76% in the first half of this year, a stark contrast to the KOSPI's 100.84% surge over the same period.

Although the KOSDAQ index briefly reached a record high of 1226.18 in April, it has since relinquished all its gains, falling below the 1000-point benchmark. This underperformance is partly attributed to a concentration of investment in KOSPI and large-cap semiconductor stocks. However, a more fundamental issue identified is the presence of underperforming companies that drag down the overall health and credibility of the market.

To address this, the Korea Exchange (KRX) is implementing stricter measures. Jung Eun-bo, KRX Chairman, emphasized the need to "actively discover quality companies and promptly weed out marginal ones." Starting this month, companies with a market capitalization below 20 billion won or a stock price below 1,000 won will undergo a review period before potential delisting. This aims to restore investor confidence, particularly among individual investors who account for 76% of KOSDAQ trading volume.

Furthermore, the KRX plans to introduce a "KOSDAQ Select" (tentative name) system, a tiered market structure designed to separate quality companies and attract institutional investment. This initiative seeks to shed the KOSDAQ's image as a "minor league" and ensure that valuable companies are not undervalued due to the market's overall struggles. The KRX is also developing a new index that specifically tracks these high-quality companies, aiming to provide a clearer benchmark for their performance.

The core is a structure that actively discovers quality companies and promptly weeds out marginal ones.

— Jung Eun-boChairman of the Korea Exchange, outlining plans for KOSDAQ's development.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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