KOSDAQ Shakeup: Korea to Delist Weak Firms & Boost Market Innovation

South Korea’s Kosdaq market is facing increased scrutiny and potential reforms following a surge in its index, exceeding 1000 points for the first time in over four years, concurrent with the Kospi surpassing 5000 points. This rise has prompted authorities to focus on revitalizing the Kosdaq, with an emphasis on addressing underperforming companies and attracting innovative businesses.

Focus on Market Integrity

Presidential Directive

The push for change comes after the President likened struggling companies within the market to “rotten goods,” stressing the need for a thorough “product cleanup.” This sentiment signals an anticipated acceleration of plans to remove poorly performing companies and encourage the listing of more innovative firms.

Current Review of Listings

As of February 1st, the Korea Exchange (KRX) is currently reviewing 23 Kosdaq-listed companies for potential delisting. These companies are either undergoing a substantial review or are awaiting final delisting decisions after being given time to improve.

Did You Know? The Korea Exchange has already delisted NK Max and Kinosmed following a substantial review process in the previous month.

Addressing Market Manipulation

Alongside the removal of underperforming companies, the President also highlighted the importance of tackling “pickpocketing,” a reference to curbing market manipulation and illegal practices. This dual focus suggests a comprehensive approach to restoring investor confidence.

Strengthened Regulations and Oversight

Increased Listing Requirements

The Financial Services Commission (FSC) is strengthening the requirements for Kosdaq listings. Effective last month, the minimum market capitalization requirement has been raised from 4 billion Korean won to 15 billion Korean won.

Expanded Review Capacity

To expedite the review and delisting of struggling companies, the KRX plans to add another team to its listing department. This expansion aims to improve the efficiency of the delisting process.

Expert Insight: The emphasis on removing underperforming companies and raising listing requirements suggests a deliberate effort to improve the overall quality and stability of the Kosdaq market, potentially attracting more long-term investment.

Broader Exchange Reform

A broader reform of the Korea Exchange is also underway. Following a directive from the President, the Presidential Policy Office and the FSC have initiated discussions regarding these reforms.

Frequently Asked Questions

What is driving the focus on the Kosdaq market?

The Kosdaq index recently surpassed 1000 points, following the Kospi exceeding 5000 points, prompting authorities to prioritize market innovation and integrity.

How many companies are currently under review for delisting?

The Korea Exchange is currently reviewing 23 Kosdaq-listed companies for potential delisting as of February 1st.

What specific companies are facing scrutiny?

In addition to NK Max and Kinosmed, which have already been delisted, companies like Panadu, which faced “inflated listing” concerns, and Samcheonri Bicycle, due to embezzlement and breach of trust, are awaiting review decisions.

As the Kosdaq undergoes these changes, will the focus on innovation and stricter regulations lead to a more stable and attractive market for investors?