Son Byung-du "Bring Korean Unicorns Home... No Major Confusion Expected from Short Selling Resumption" (Comprehensive)

Son Byung-doo, Chairman of Korea Exchange, Press Conference
Listing System Reform... "We Will Enhance Attractiveness for Korean Unicorns to List Domestically"
Short Selling Management System Established... "We Will Prepare Thoroughly to Prevent Confusion"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Sohn Byung-doo, Chairman of the Korea Exchange (KRX), recently announced plans to improve the listing system to attract unicorns (unlisted startups valued at over 1 trillion KRW) that have been turning to overseas listings back to the domestic market. The plan includes easing various requirements and establishing a listing system that reflects the characteristics of next-generation growth companies.

On the 31st, Chairman Sohn held a press conference at the Korea Exchange Seoul office in Yeouido, Yeongdeungpo-gu, Seoul, under the theme "A Strong Capital Market Supporting Korea's Innovation Growth." He explained, "In response to the prolonged COVID-19 pandemic, the era of the new normal, and rapid changes in the financial environment due to digital technological innovation, the Exchange has prepared '5 Core Strategies and 20 Implementation Tasks' to lead the continuous innovative growth of the capital market."

"We Will Attract Korean Unicorns to the Domestic Stock Market"

The first priority was reforming the listing system. Since unicorns such as Market Kurly and Yanolja, in addition to Coupang which listed on the U.S. stock market on the 11th, are shifting their listing routes to the U.S. market, the plan is to create incentives to bring these innovative companies to the domestic stock market. Since the 9th, a new KOSPI market capitalization sole requirement (1 trillion KRW) has been established, and the market capitalization and equity capital requirements have been eased from 600 billion KRW and 200 billion KRW to 500 billion KRW and 150 billion KRW, respectively. Furthermore, the listing system will be improved to reflect the characteristics of unicorn companies and next-generation growth sectors such as BBIG (Bio, Battery, Internet, Game), and the screening process will be enhanced by involving technology evaluation experts in qualitative reviews.

First, to facilitate smooth KOSDAQ listings for unicorns, the technology special evaluation procedure for market-evaluated excellent companies will be simplified, and customized consulting will be provided to actively nurture growth-type companies. Infrastructure will also be established by investing stable venture capital in unlisted innovative companies through the Corporate Growth Investment Company (BDC) currently being introduced by the government. The support project for small and medium-sized enterprises' research will be expanded to produce and distribute high-quality investment analysis information free of charge for companies that have been excluded from previous corporate analysis targets.

Chairman Sohn explained, "In the case of Coupang, it was natural to list in the U.S. because its headquarters and many executives are American nationals, but generally, the costs of overseas listing and maintenance can be up to 10 times higher than domestic costs." He added, "There are also many risks of lawsuits, so domestic listing has advantages. We will improve the shortcomings of the current system and enhance the attractiveness of the domestic market."

Strengthening ESG... Providing Various Indicators

He also revealed plans for ESG (Environmental, Social, Governance) initiatives. First, themed ESG Exchange-Traded Funds (ETFs) and Exchange-Traded Notes (ETNs) will be continuously developed and supplied. Additionally, three climate change indices?KRX300 Climate Change Index, KOSPI200 Climate Change Index, and Climate Change Leaders Index?will be launched, along with fast-track listings of ESG investment products and the establishment of a comprehensive ESG information portal.

Provided by Korea Exchange

ESG-related investment indicators are also under development. Research is underway to create a "Price to ESG" ratio similar to Price-to-Earnings Ratio (PER) and Price-to-Book Ratio (PBR). However, since ESG is a qualitative indicator, there are concerns about whether it can be quantified like PER or PBR. Chairman Sohn said, "We are considering all these aspects and continuing discussions," adding, "We will strive to create indicators that everyone can accept through steady communication."

No Issues with Short Selling Resumption

Regarding the scheduled resumption of short selling on May 3, he stated that preparations are proceeding smoothly. A short selling management system has been established, and the inspection cycle for illegal short selling has been shortened from six months to one month. New techniques such as settlement quantity shortage trades, pre-sell post-buy trades, and theme-based short selling have been developed, and a dedicated special inspection team has been operating since last month. From June 6, penalties for illegal short selling will increase to imprisonment of over one year or fines of 3 to 5 times the amount of unjust gains, and strict enforcement will be ensured. He also explained why real-time monitoring of short selling violations is not conducted, saying, "Like highway speeding enforcement, which is not real-time but fines are imposed after being caught on surveillance cameras, it operates in a similar manner."

Concerns about side effects from the resumption of short selling were also dismissed. He said, "Looking at past cases of short selling resumption, there was no significant turmoil as feared," adding, "Especially this time, since the partial resumption will focus on large-cap stocks (components of the KOSPI200 and KOSDAQ150 indices) with low short selling ratios, it should not cause major issues."

Meanwhile, other plans include ▲ upgrading the Exchange's IT infrastructure to world-class levels ▲ jointly developing indices with China and cross-listing ETF products ▲ expanding new overseas themed ETF and ETN products. Chairman Sohn pledged, "We will listen to voices from the field and closely cooperate with the government to reflect them in systems and policies," and "We will carry out projects systematically and achieve results with speed."

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