Finally Unveiling This Month: KOSDAQ Global Segment... Accelerating Strengthening of Delisting Criteria

Hong Sun-wook, Vice President and Head of KOSDAQ Market Division at Korea Exchange

Hong Soon-wook, Head of the KOSDAQ Market Division (Vice President) at the Korea Exchange, is explaining the 'KOSDAQ Global Segment' to an Asia Economy reporter at the exchange office on the 18th. Photo by Korea Exchange

[Asia Economy Reporter Lee Seon-ae] The KOSDAQ market appears poised to finally break free from the fate of being regarded as the second-tier league of the Korea Composite Stock Price Index (KOSPI) market. Just as major tech companies like Apple and Tesla are listed and traded on the U.S. NASDAQ market, a separate segment will be created within the Korean KOSDAQ market. An index composed of companies included in the 'KOSDAQ Global Segment' will also be launched.

Hong Soon-wook, Vice President in charge of the KOSDAQ Market Headquarters at the Korea Exchange (KRX), met with reporters at the exchange office at 3 p.m. on the 18th and stated, "We plan to announce the inclusion criteria and operational plans for the KOSDAQ Global Segment within this month," adding, "Based on this, an index will also be calculated."

A segment shares the same market brand but operates as an independent sub-market with separate entry and exit criteria depending on the characteristics of the constituent companies. The Global Segment is a concept grouping leading companies that represent the market. This segment is expected to consist of top-tier companies accounting for about the top 5% of the KOSDAQ. To be included in the segment, companies must meet requirements such as ▲market capitalization ▲operating performance ▲corporate governance ▲liquidity. Additionally, when selecting companies for the KOSDAQ Global Segment, the governance (G) aspect of ESG (Environmental, Social, Governance) criteria will be actively utilized. Vice President Hong explained, "The KOSPI market officially reflects only governance (G), and since environmental (E) and social (S) factors are still in the early stages, the KOSDAQ Global Segment will also reflect only governance." The Korea Exchange is showing strong determination to enhance the reputation of the KOSDAQ market and actively attract foreign investment through this carefully selected segment of companies.

Recently, Vice President Hong has also been focusing on strengthening delisting criteria to develop the KOSDAQ market. The exchange is currently preparing delisting requirements and procedures to minimize investor damage and consider corporate rehabilitation potential. This is part of the government's national agenda to restore fairness and trust in the capital market. Until now, companies that failed to meet financial requirements?such as those with a capital erosion rate of 50% or more for two consecutive years or KOSPI stocks with sales below 5 billion KRW for two consecutive years?were subject to delisting procedures without any opportunity to explain. However, recognizing that applying uniform past financial criteria is unreasonable, the exchange plans to decide on delisting by considering future factors such as corporate rehabilitation potential and business viability. He said, "Since the number of delisted companies is higher in the KOSDAQ market compared to the KOSPI market, the KOSDAQ Market Headquarters will take charge of revising listing regulations," adding, "We expect to establish specific criteria by around next month."

Moreover, efforts are being accelerated to introduce a new model for technology evaluation, a major pillar of special listing, next year. The technology special listing system allows companies that receive a certain level of rating from specialized evaluation agencies or recommendations from listing sponsors to list with relaxed financial requirements compared to general listings. It was introduced to help companies with technological capabilities that struggle to raise investment funds due to lack of immediate profits. Vice President Hong is focusing on standardization. He emphasized, "Currently, 24 specialized agencies handle technology evaluations, but their evaluation indicators differ by agency. To secure objectivity in evaluation, we removed overlapping indicators, identified common indicators, and restructured the model. Additionally, we prepared evaluation indicators that can accommodate emerging convergence industries." The anonymity of the evaluating agencies is guaranteed to strengthen independence, and the evaluation process has been improved by standardizing forms. Vice President Hong said, "By creating a standardized evaluation model and distributing it to the 24 evaluation agencies, evaluations based on this will reduce discrepancies and ensure consistency, making it easier to accommodate new industries. We are continuing this research this year and expect to release it by February next year."

Regarding the KONEX market, he expressed the intention to continue activation policies and secure its identity. KONEX was created as a bridge market for KOSDAQ listings, serving as a significant ladder for companies that cannot list directly on KOSDAQ. The KONEX market, launched in July 2013, peaked in 2016 with 50 listings but has since declined to 29 in 2017, 21 in 2018, 19 in 2019, and 12 in 2020. Last year, only seven companies were listed. Although it serves as a ladder, the decreasing number of listings has undermined its founding purpose, leading to concerns about its identity. However, Vice President Hong noted, "Looking at the number of transfers from KONEX to KOSDAQ, we can say the purpose of establishment has been achieved," adding, "While the entry barrier to KOSDAQ has lowered, increasing the number of companies going directly to KOSDAQ, there will still be companies that cannot go directly and will seek KONEX." He continued, "Although the market itself has contracted, we expect at least 12 listings on KONEX this year," emphasizing, "We will continue to implement activation measures and lead the market."

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