South Korea delays stricter delisting rules for low-market-cap companies by six months

South Korea will give listed companies six more months before applying stricter market-capitalization rules for delisting, after a sharp deterioration in the KOSDAQ market prompted calls for a delay.

Deputy Prime Minister and Finance Minister Koo Yun-cheol made the decision at a joint market-monitoring meeting with related agencies on Sept. 4 in Seoul. Financial authorities and the Korea Exchange raised the minimum market capitalization for KOSDAQ-listed companies from 15 billion won to 20 billion won on July 1. The next increase, to 30 billion won, had been scheduled for January but will now take effect in July next year.

The timetable for raising the KOSPI delisting threshold from 30 billion won to 50 billion won will also move to July. The KOSDAQ index rose above 1,200 in May but has since fallen into the 800s, and industry representatives argued that the market needed a grace period to stabilize.

The government also created a possible route to the KONEX market for companies facing delisting from KOSPI or KOSDAQ because they fall below the market-capitalization threshold. Eligible companies could transfer without a liquidation-trading process while retaining their existing price, allowing investors to continue trading their shares. Applications will be limited to companies meeting financial requirements, including recording operating profits in at least two of the past three years.

At the close of trading, the KOSPI rose 107.73 points, or 1.64 percent, to 6,687.21, while the KOSDAQ gained 23.29 points, or 2.95 percent, to 813.50. The report attributed the broader market rise partly to lower U.S. Treasury yields.

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The delisting criteria should be improved so that they reflect companies’ overall financial health rather than relying solely on market capitalization.