This year, the number of listed stocks reflecting the par value of stocks listed on the KOSPI market has shown a decline for the first time. This is interpreted as the result of corporations actively retiring their own shares for shareholder return and the Korea Exchange strengthening its listing review.
In a situation where corporate value remains the same, if the number of stocks decreases, the value per share increases, which is seen as a positive signal for resolving the 'Korea discount.'
According to NH Investment & Securities on the 24th, from the beginning of this year until July, the number of listed stocks on the KOSPI market, calculated based on a par value of 5,000 won, indicated a negative (-) for the first time in the past 10 years compared to the previous year. In contrast to the annual increases of 1.12% in 2022, 1.79% in 2023, and 1.95% in 2024, the number of stocks decreased by about 0.03% this year.
NH Investment & Securities has calculated only the past 10 years, but since the Korean stock market has grown for decades prior, the decrease in the number of par stocks could be a historic first this year.
The biggest factor for the decrease in the number of stocks this year is the retirement of own shares. Corporations such as Samsung Electronics and financial holding companies are buying back and retiring their own shares for shareholder return. From January to August 21 this year, the scale of share retirement by KOSPI-listed companies reached about 21.4 trillion won, nearing double last year's annual retirement scale (about 11.6 trillion won).
Samsung Electronics retired about 3 trillion won worth of its own shares in February this year according to its shareholder value enhancement plan announced last year. Last month, it additionally retired about 2.8 trillion won. Meritz Financial Group announced large-scale retirements of 1.25 trillion won, Shinhan Financial Group 800 billion won, and KB Financial 660 billion won, expanding shareholder returns.
An analyst at Eugene Securities noted, "Since last year, announcements of share retirements led by large-cap stocks have been made in accordance with corporate value enhancement plans, and the recent announcement of relatively large-scale (share retirement) especially among financial holding companies can also be seen as an influence of government policy."
The financial investment industry also points to the influence of the Korea Exchange strengthening initial public offering (IPO) regulations. Earlier, the Financial Services Commission and the Korea Exchange announced measures to improve the 'IPO and delisting system' early this year, strengthening the criteria for listings and delistings. This year, six corporations were listed on the KOSPI market, half the number (11) from the same period last year.
The issue of an increasing number of stocks has been cited as the reason why the KOSPI index has earned the reputation of 'Boxpi.' As stock increases from capital increases and new listings occur, the total market capitalization has grown, but the index has stagnated.
A securities firm analyst stated, "The number of listed stocks on the KOSPI has increased by an average of about 2% annually, which has caused the profit growth rate perceived by investors to appear lower than it actually is."
There is a possibility that the number of KOSPI index stocks will continue to decline in the future. The Financial Services Commission is considering a principle of 'indefinite retirement' for its own shares.
From July this year, regulations for the escrow of new listings have been strengthened, reducing the incentive to pursue listings. Under the revised IPO system, 40% or more of the institutional investor allocation must be assured for priority allocation during the listing process. If the criteria are not met, the underwriter must hold 1% of the offering amount (up to 3 billion won) for six months.
However, many believe that for the stock market to secure sustainability, corporate profit strength must be adequately supported. A representative from a financial holding company remarked, "To increase dividends and retire own shares, profits must be generated first, and there seems to be a lack of policy deliberation on this aspect."