The Korea Exchange is raising the threshold for the 'KOSDAQ Global Segment' (hereinafter referred to as the Global Segment), which only gathers profitable corporations in the KOSDAQ market. Strengthening the maintenance criteria is a response to signs of investors planning to leave the KOSDAQ market. As a result of this action, some corporations will be expelled. However, the timing for implementation has been set for next year, considering market shocks.
According to the National Assembly and financial authorities on the 7th, the Korea Exchange will maintain the number of evaluation institutions required for the Global Segment at 'two or more evaluation institutions with a corporate governance rating of C or higher' but raise the rating level to 'B.' This means that to maintain a position in the Global Segment, corporations must receive corporate governance scores of B or higher from two evaluation institutions.
Here, evaluation institutions refer to organizations like the Korea Corporate Governance Service (KCGS), Korea ESG Research Institute, and SustainBest that quantify companies' environmental, social, and governance (ESG) factors and assign scores. They assess the level of the company's environmental management system, human rights management, and internal controls to determine the ratings.
The implementation date for the strengthened criteria is in June next year. The criteria have been raised, and it is expected that several corporations will be expelled, hence the decision to allow sufficient time.
The Global Segment consists of a collection of corporations with excellent market evaluations and high management performance in terms of profitability or operational results, recognized for their growth potential and technological prowess among 1,792 KOSDAQ listed companies. The system was ambitiously introduced by then-Korea Exchange Chairman Son Byung-doo in 2022, who stated, 'I will change the fate of the KOSDAQ market being perceived as a secondary league of the stock market.'
There are also exchange-traded funds (ETFs) based on the index that gathers only these corporations. For listed companies, being included in the Global Segment allows them to expect passive fund inflows. Currently, only about 2% of all listed companies are named on this list.
Until last year, the Korea Exchange had been lowering the entry requirements for the Global Segment. In the first year of implementation, even if companies received a C grade from the KCGS, they were considered to have met the requirements as long as they promised to strive for a B grade or higher.
Last year, the number of evaluation institutions was increased from one (KCGS) to three, and corporations only needed to receive a C grade from two of them. The Korea Exchange explained this as a diversifying measure for evaluation institutions; however, it is true that listed companies unable to meet the requirements benefited from this change. Consequently, the strengthening of the requirements is seen as unusual.
The Korea Exchange is raising the requirements for maintaining qualifications in the Global Segment to revitalize the KOSDAQ market. The intent is to reorganize the Global Segment, which is considered a sore spot for the Korea Exchange, so that only the most profitable corporations are filtered out, shifting investor interest back.
The Global Segment was introduced to overcome the phenomenon where large corporations are relatively undervalued while close to 2,000 items are traded in the KOSDAQ market. It is a system that manages only high-quality corporations separately, but the market response has been almost nonexistent.
Seven months after the index was published, only Mirae Asset Global Investments and Samsung Asset Management, the top two companies among 27 asset management firms engaged in ETF businesses, launched related ETFs. However, products have not sold well, leading to a trend of decreasing total net worth (AUM) of the ETFs.
The ETF launched by Samsung Asset Management, which was listed at 50 billion won, is currently down to 10.8 billion won, reduced to one-fifth, while Mirae Asset Global Investments' product, listed at 100 billion won, has shrunk to 5.4 billion won. The latecomer, Kiwoom Asset Management's 'KIWOOM KOSDAQ Global,' amounts to just 5.6 billion won, which is a level unable to expect passive funds.
However, the index report is good. This is why the Korea Exchange is full of intent to revive it through resuscitation. From the day the Global Segment index was launched until the 4th of this month, the KOSDAQ index fell by 6.08% (731.92 to 687.39), while the Global Segment index rose by 37.6%. This is because Alteogen surged from 40,000 won to 360,000 won.
A representative of the Korea Exchange noted, "The reinforcement of the Global Segment's requirements is not yet a final decision, but it is under review."