Kakao Pay Included in KOSPI 200... Yak or Dok?

On the 3rd, attendees are taking a commemorative photo after the Kakao Pay KOSPI listing ceremony held at the Korea Exchange in Yeouido, Seoul. From the left: Song Young-hoon, Deputy General Manager of the Korea Exchange Securities Market Headquarters; Ahn Sang-hwan, Chairman of the Korea IR Association; Jung Hyung-jin, Korea Representative of Goldman Sachs Seoul Branch; Lim Jae-jun, General Manager of the Korea Exchange Securities Market Headquarters; Son Byung-doo, Chairman of the Korea Exchange; Ryu Young-joon, CEO of Kakao Pay; Kim Joo-won, Vice Chairman of Kakao; Jang Seok-hoon, President of Samsung Securities; Park Tae-jin, Head of JP Morgan Securities Korea; Jung Woo-yong, Vice Chairman of the Korea Listed Companies Association Policy Committee.
Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ji Yeon-jin] Will the KOSPI 200 index be a boon or a bane?

Kakao Pay, which made a dazzling debut in the top 10 of KOSPI market capitalization, is set to be included in the KOSPI 200 index next month unless there is an unexpected event. The KOSPI 200 is an index used as the underlying index for financial products such as futures, options, and ETFs. Inclusion in the index attracts passive funds but also makes the stock subject to short selling. The components of the index are regularly changed every June and December, and changes can also occur when large-cap stocks are newly listed.

According to the Korea Exchange on the 9th, in this regular change, Kakao Pay will be specially included if its average daily market capitalization during the 15 trading days after listing (November 3?23) ranks within the top 50 of the KOSPI market capitalization. As of the previous day, Kakao Pay’s market cap was 20.0113 trillion KRW, ranking 21st in the KOSPI market capitalization. On its first day of listing, November 3, the stock price more than doubled compared to the IPO price, reaching a corporate value exceeding 25 trillion KRW and ranking 13th in KOSPI market capitalization. However, the stock price plunged sharply after listing, falling 20.47% until the previous day. On the day in question, it started trading flat, rose slightly in early trading, then turned downward again.

The market consensus is that since the special inclusion condition for KOSPI 200 is a market cap within the top 50, inclusion is likely to proceed smoothly if the recent sharp decline in stock price does not continue.

However, concerns remain over a potential “overhang” from Kakao Pay, raising fears of further price declines. Alipay Singapore Holding, the second-largest shareholder of Kakao Pay, holds 28.47% of shares that are excluded from existing shareholder lock-up. Additionally, 41% of shares held by institutional investors (7.17%) are not subject to mandatory lock-up agreements and can be sold at any time. Of Alipay’s remaining shares, 8.95% are restricted from sale for six months from the listing date, and 1.70% are restricted for one year from the issuance date (April 14, 2021). This means there is a possibility of overhang anytime before or after inclusion in the KOSPI 200.

Moreover, inclusion in the KOSPI 200 enables short selling. The Financial Services Commission partially resumed short selling from May 3, limiting it to KOSPI 200 stocks after strong opposition from retail investors. Kakao Bank, which was listed in August, saw its stock price begin a significant decline after its inclusion in the KOSPI 200 was confirmed on September 1, and including the period until the mandatory lock-up on institutional holdings was lifted the previous day, the stock fell by 33.73%.

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