Korea Exchange (KRX) is speeding up efforts to improve the structure of the KOSDAQ market. While expanding the exit of underperforming corporations, it plans to introduce a separate segment tentatively called "KOSDAQ Select" to build a market within KOSDAQ where corporate value is properly assessed.
◇ Exchange says "research under way to introduce segment… aiming for final announcement in the fourth quarter of this year"
Choi Ji-woo, managing director of the KOSDAQ Market Division at Korea Exchange (KRX), said at the "30th anniversary of KOSDAQ market opening" ceremony held at the Conrad Hotel in Yeouido, Seoul, on the 1st that "for KOSDAQ to leap into a fully fledged market, it must solve two structural tasks: restoring market trust and addressing the undervaluation of corporate value."
The timeline for introducing the segment was also disclosed during a Q&A. Choi said, "We are currently conducting a related study with the Korea Capital Market Institute and plan to begin public hearings as early as this month," adding, "based on the study results, we will gather opinions and aim to announce concrete plans in September–October or in the fourth quarter."
The exchange believes that with high-quality corporations and underperforming corporations mixed in the same market, it is difficult for investors to select corporations, and some weak corporations are causing undervaluation across the market. To fix this, it is reviewing a plan to group corporations with growth and stability into a separate segment, "KOSDAQ Select" (tentative name).
It also plans to establish investment criteria that institutional investors can use and develop segment-based indexes to boost the brand effect of high-quality corporations. Conversely, it will classify risky corporations into a separate watchlist to reduce investor losses.
Choi said, "A segment will not be fixed once included; it will operate in a way that allows movement through regular re-evaluations," adding, "the goal is to build a market where innovative corporations grow and investors can invest with confidence."
The exchange will first further strengthen the delisting of underperforming corporations. Choi said, "The number of corporations decided for delisting increased from 22 in 2021 to 38 last year, and this year we expect it to rise to around 88," adding, "the goal is not delisting itself but restoring trust in the overall market and enhancing the accountability of listed corporations and market soundness."
Starting this year, the exchange is applying a delisting requirement for market capitalization under 20 billion won, gradually tightening the standards for market capitalization and revenue, while also pushing improvements to substantive review procedures and stronger penalty points for inaccurate disclosures.
It will also expand information provision and improve the technology listing-by-exception system. The exchange plans to expand generative artificial intelligence (AI)-based corporate analysis reports and short-form reports, and to establish screening criteria for technology listings tailored to new industries such as advanced robotics and cybersecurity.
Choi said, "What matters is not uniformly raising or lowering the bar but building a screening framework that can assess technological capability more accurately."
The exchange assessed that funding conditions surrounding KOSDAQ are also improving. It said the basis for inflows of long-term capital is being strengthened as KOSDAQ weightings are reflected in pension fund performance evaluations and through the expansion of the Public Growth Fund, KOSDAQ venture funds, and the introduction of business development companies (BDC).
Choi also said, "Unlike traditional market cap–centric indexes, new segment-based indexes will be designed to reflect growth and stability together, taking into account institutional investor demand," adding, "we are not operating with a preset target level for the KOSDAQ index itself."
◇ Industry says "segment introduction should go hand in hand with inflows of institutional funds and corporate restructuring"
At the panel discussion held that day, participants also suggested that, to invigorate the KOSDAQ market, the introduction of segments should be pursued alongside the inflow of institutional investors, enhancement of shareholder value by corporations, and improvements to listing systems.
Kang So-hyun, head of the Capital Markets Department at the Korea Capital Market Institute, said, "Over the past 30 years, KOSDAQ has grown into a market that fosters innovative corporations, but now that it holds about 1,800 corporations, it is time to consider a market structure suited to corporate characteristics," adding, "rather than managing high-quality and underperforming corporations under a single system, it is desirable to provide tailored support through segments."
Jin Seong-hoon, group head of the Research and Policy Division at the KOSDAQ Association, called for expanding long-term venture capital and preparing systems tailored to small and midsize corporations. Jin said, "Because KOSDAQ has a high share of retail investors, there needs to be a steady inflow of stable, long-term capital," adding, "corporations should not seek recognition solely for their technology but should strengthen proactive IR and shareholder communications."
Institutional investors also agreed that improving corporate fundamentals should come first. Kim Ji-woon, head of department at Samsung Active Asset Management, said, "If the investment appeal is high, institutions will invest," adding, "corporate profits, improvements in governance, and protection of minority shareholders must proceed together."
Sung Ju-wan, executive vice president at Mirae Asset Securities, suggested, "To attract strong innovative corporations, we need not only the introduction of segments but also institutional improvements such as developing diverse indexes and shortening listing review periods."
Hwang Seung-taek, head of research at Hana Securities, said, "There are many KOSDAQ corporations with competitiveness in growth industries such as AI, semiconductors, and robotics," adding, "corporations need to make active use of research and IR to strengthen communication with the market."
Wrapping up the discussion, Choi said, "Tougher delistings are not aimed at expelling corporations but at restoring market trust and improving fundamentals," adding, "through segments, we will expand the base of institutional investor demand and enhance KOSDAQ's brand value."