Will KOSDAQ Undervaluation Be Resolved? Exchange to Implement 'Global Segment' Designation System Next Month

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[Asia Economy Reporter Lee Myunghwan] The Korea Exchange announced on the 25th that it will implement a system to designate companies with excellent financial performance, market evaluation, and corporate governance in the KOSDAQ market as 'KOSDAQ Global Segment Companies.'

According to the implementation of this system, the Exchange will accept applications from companies until the 11th of next month, complete the review and selection of Global Segment Companies by the 20th of the same month, and designate the selected companies as KOSDAQ Global Segment Companies starting from the 21st.

To be newly designated as a KOSDAQ Global Segment Company, companies must meet market evaluation and financial performance requirements such as market capitalization, as well as corporate governance requirements. Other criteria, including corporate soundness and accounting transparency, must also be satisfied to be designated as a Global Segment Company.

Specifically, general companies must have an average daily market capitalization exceeding 500 billion KRW over the past year and meet financial performance requirements such as sales of 300 billion KRW or operating profit of 30 billion KRW or more. They must also receive a grade of B or higher in the corporate governance evaluation by the Korea ESG Standards Institute. Additionally, they must not have been designated as a non-compliant disclosure company in the past year and must maintain accounting transparency.

Even after designation, if reasons such as failure to meet corporate governance standards or deterioration of corporate soundness arise, the designation may be canceled. However, market evaluation and financial performance requirements will be applied more leniently compared to the requirements for new designation. The Exchange plans to take actions for new designations and cancellations of Global Segment Companies on the first business day of May each year.

The Exchange stated that the introduction of the Global Segment designation system was pursued as a new strategy to resolve the discount and promote growth in the KOSDAQ market. This is due to the market's decreased attractiveness, as the KOSDAQ market has been undervalued compared to the KOSPI despite quantitative growth. It was also pointed out that KOSDAQ blue-chip companies have been relatively discriminated against and have not been properly recognized due to a lack of passive fund inflows.

The KOSDAQ Global Segment Index will also be announced. This index will be calculated starting from the designation date of the companies on the 21st of next month. The Exchange plans to develop linked products such as Exchange-Traded Funds (ETFs) along with the announcement of this index.

Companies designated as Global Segment will be provided with services such as investor relations (IR) meetings, English translation services for Korean disclosures, and exemptions from listing fees and annual charges.

One-stop investment information will also be provided through a dedicated KOSDAQ Global Segment website. The Korea Exchange will develop a function to separately search for KOSDAQ Global Segment companies on its website and plans to expand this to home trading systems (HTS) and financial portals in the future.

The Exchange plans to continuously prepare incentives for KOSDAQ Global Segment companies going forward.

The Exchange explained that the Global Segment designation system is expected to create an environment where investors can invest stably and long-term in the KOSDAQ market. Furthermore, it is expected that the development of related indices and ETFs as representative products of the KOSDAQ market will expand investments from institutional and foreign investors with mid- to long-term investment tendencies.

It was also noted that designated companies are expected to benefit from promotional effects certifying them as blue-chip companies representing KOSDAQ, as well as from a revaluation of corporate value through additional inflows of investment funds.

An Exchange official said, "We expect an expansion of investment demand across the KOSDAQ market and an increase in the corporate value of listed companies through enhancing the KOSDAQ brand value. Improving the market brand value will strengthen the sense of belonging of excellent companies to the market and promote the listing activation of promising innovative companies."

The Exchange plans to hold a launch ceremony along with the announcement of the KOSDAQ Global Segment target companies on the 21st of next month.

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