[Inside Chodong] Thousand KOSDAQ Again: The Voyage of the KOSDAQ Global Segment

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] "Through a ‘segment’ composed of selected companies, we will actively lead the improvement of the KOSDAQ market’s reputation and the inflow of investment."

Hong Soon-wook, Vice President in charge of the KOSDAQ Market Headquarters at the Korea Exchange, expressed strong confidence last month in the ‘KOSDAQ Global Segment’ set to be unveiled this month. He also showed a firm determination to change the fate of the KOSDAQ market being regarded as the second division of the KOSPI market. Regarding the background of this system’s introduction, Sohn Byung-doo, Chairman of the Korea Exchange, presented a blueprint to create a separate segment in the KOSDAQ market, just as large tech companies like Apple and Tesla are listed and traded on the NASDAQ market in the U.S., aiming to resolve the undervaluation (discount) and develop KOSDAQ into a differentiated market like NASDAQ.

Discussions on introducing the KOSDAQ segment began around this time last year. All capital market experts attending the seminar for the introduction emphasized the necessity of the segment. However, general investors attending the seminar raised questions about why it was needed when KOSDAQ was thriving by entering the ‘Thousand KOSDAQ era,’ attracting attention.

At that time, after the spread of COVID-19, abundant liquidity was supplied, and the KOSDAQ index surpassed 1000, seemingly solidifying its status as the Thousand KOSDAQ era opened. As a result, the determination to create a differentiated market like NASDAQ did not resonate with individual investors. In fact, since the segment seemed likely to be composed mainly of the top market capitalization stocks in KOSDAQ, there was widespread distrust about how this segment could enhance the overall market’s status. Given the issue of some insolvent companies spreading negative reputation across the market, voices calling for stronger overall market surveillance rather than gathering excellent companies were even louder.

The Korea Exchange, after more than a year of effort, will finally unveil the segment on the 21st and calculate its index. The segment will consist of excellent companies meeting specific criteria. However, the number of companies meeting these requirements is expected to be small due to the high discriminative power of the criteria. It will be conducted only for a few excellent companies, and that too through prior application.

Although distrust was abundant when the seminar for introduction was held, expectations for the effects the segment will bring are now high. For individual investors, it is also a hope. The KOSDAQ, which once exceeded 1000, has collapsed like falling leaves this year. It dropped to the 600s and, despite a recent recovery trend, has barely surpassed 700. They are hoping that the segment’s voyage will open the Thousand KOSDAQ era again.

Capital market experts expect that stocks included in the segment will benefit from passive demand effects due to the development of derivative products later, and also receive various supports from the Korea Exchange, thereby injecting positive influence into the overall market. They believe that simply providing a more stable investment environment can attract more investment to KOSDAQ. If the sense of belonging is strengthened, promising innovative companies will be listed, and if listed companies make efforts to belong, the overall market’s quality could be elevated. Additionally, with the segment system settling in and the sense of belonging increasing, the number of listings transferring to KOSPI could decrease. When global stock markets collapse, KOSDAQ, which has been the worst performer with the highest decline rate, is expected to have the investment environment to leap to the Thousand KOSDAQ era, with the segment serving as a stepping stone.

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