[Practical Finance] Find the Second Kagem, Investment Fever Heating Up Off-Market

K-OTC Trading Volume Hits 952.8 Billion Won This Year, Up 97% from Last Year
Annual Trading Volume Expected to Surpass 1 Trillion Won for the First Time in 15 Years Since Market Launch
Investors Rush to Secure Shares as IPO Giants Like SK Biopharm Achieve Big Success and More Companies Prepare to Go Public

[Asia Economy Reporter Song Hwajeong] As the stock investment craze continues, the over-the-counter (OTC) market is also gaining attention. In particular, with IPO giants such as SK Biopharm, Kakao Games, and Big Hit Entertainment going public one after another, funds are pouring in to invest early in stocks expected to become major players in the future.

According to the Korea Financial Investment Association on the 6th, the total trading value of the Korea OTC Market (K-OTC) reached 958.2 billion KRW as of the 29th of last month this year. This is a 97% increase compared to 484.7 billion KRW in the same period last year. This year, it is expected that the annual trading value will exceed 1 trillion KRW for the first time in 15 years since the market was established in 2005.

The average daily trading value also exceeded 5 billion KRW for the first time this year. The average daily trading value this year is 5.124 billion KRW, which is more than 27% higher than last year's 4.03 billion KRW. The number of listed stocks on K-OTC is 136, and the total market capitalization reaches 15.4 trillion KRW. Although the number of stocks decreased by one compared to the end of last year, the market capitalization increased by 1.2 trillion KRW.

K-OTC is a systematized and organized OTC market established and operated by the Korea Financial Investment Association for trading unlisted stocks. The association operated the Free Board from July 2005 to revitalize direct financing for unlisted small and venture companies, but since the trading companies were limited mainly to a few small companies, the market's role diminished. With the launch of KONEX in 2013, the role became ambiguous, leading to the market's reorganization and the establishment of K-OTC. On K-OTC, shares of unlisted corporations subject to business report submission with public offering records, including large unlisted companies and mid-sized companies actively traded OTC, are traded. Corporations traded on K-OTC are divided into registered companies and designated companies. Designated companies are further divided into voluntary designation and consent designation. Registered companies are those registered by the association as trading targets upon the company's application, while designated companies are designated by the association as trading targets without the company's application. Voluntary designation occurs when a company meets the designated company requirements and fundraising/sales performance requirements, and the association designates it as a tradable company. Consent designation occurs when a company that meets all designated company requirements except fundraising/sales performance submits a K-OTC market designation consent form, and the association designates it as a tradable company.

Although the trading value of K-OTC was only 159 billion KRW in 2016, it has been increasing significantly every year since then. Last year, it reached 990.3 billion KRW, growing 6.6 times in three years. On December 27 last year, the daily trading value reached a record high of 23.61 billion KRW. K-OTC's trading value surpassed 500 billion KRW in 2016, 1 trillion KRW in 2018, and 2 trillion KRW in September last year. The cumulative trading value until the end of last year was 2.5163 trillion KRW, and it has exceeded 3 trillion KRW this year. Companies such as Samsung SDS, Mirae Asset Life Insurance, Jeju Air, Cafe24, and Zinus have entered KOSPI and KOSDAQ markets via K-OTC.

K-OTC's trading value began to increase significantly from 2018, due to reductions in securities transaction tax and expansions of capital gains tax exemptions. According to the Korea Capital Market Institute, on April 1, 2017, the securities transaction tax rate for K-OTC, which was relatively higher than that of on-market trading such as KOSDAQ and KONEX, was reduced from 0.5% to 0.3%. Additionally, from 2018, as part of efforts to revitalize K-OTC, capital gains tax exemptions were extended from venture companies to mid-sized and small companies by excluding shares transferred by small shareholders of small and mid-sized companies from taxation. The proportion of companies exempt from capital gains tax among all trading companies increased from 19.3% in 2017 to 66.7% in 2018.

While K-OTC is growing rapidly, the private OTC stock trading market is showing an even steeper growth trend. The monthly active users (MAU) of the integrated unlisted stock trading platform Securities Plus Unlisted increased from 10,000 at the beginning of this year to 93,000 in August. The cumulative number of subscribers also exceeded 180,000 in early September, up from 100,000 in July.

With the stock investment craze among individual investors this year, interest in the OTC market is growing. IPO giants such as SK Biopharm, Kakao Games, and Big Hit have recorded successive successes, increasing the number of investors trying to preemptively invest in companies scheduled for listing, leading to a boom in the OTC market. In the case of Kakao Games, two days before its KOSDAQ listing on the 8th of last month, it recorded a new high of 78,750 KRW in the OTC market, which is more than three times the public offering price of 24,000 KRW. Kakao Bank, scheduled to be listed next year, was traded at 117,000 KRW on Securities Plus Unlisted on the same day. Its market capitalization is about 42.7 trillion KRW, approaching the combined market capitalization of the four major financial holding companies (approximately 44 trillion KRW).

This content was produced with the assistance of AI translation services.