IPO boom to be expected in the Korean Stock Market

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Along with the global economic recovery, the Initial Public Offering (IPO) market in South Korea has been expected to boom this year. Although recently uncertainties emerge in stock market due to the Middle East turmoil, leading some companies to postpone their IPO plans, the IPO market is still forecasted to be heated with over 5 trillion won. Companies usually do not tend to pursue IPO in February as they settle accounts. Yet, last February this year, things were different. Six companies including Hi-mart made a request for preliminary screening to be listed.

 

An official from the Korea Exchange (KRX) said that whereas current stock market situation temporarily makes firms waver in pushing toward the IPO, the number of firms which asked for prior screening reflects the rosy future of the IPO market. He emphasized that once global stock markets recover, more companies would kick off for the IPO than last year. Last year, unexpected listings by Samsung Life Insurance (4.89 trillion won) and Korea Life Insurance (1.79 trillion won) led 10 trillion won record. The IPO market seems to keep this momentum and the market size is likely to more than double that of last year.

 

Market experts expect Korea`s securities market to see 30~40 new listings, while KOSDAQ awaits 80~90 new listings. Three to four trillion won are expected to flow into the securities market and 1.5 trillion won to the KOSDAQ market, which possibly create a total IPO market of more than five trillion won. Potential entrants to the IPO markets in 2011 are as follows. Mirae Asset Life Insurance will push forward to be listed, tracking the string of rallies by life insurance companies last year. The Korea Aerospace Industries (KAI), Hi-Mart, GS Retail are also considering IPOs. The Incheon International Airport Corporation and POSCO E&C, which failed to go into the IPO market last year, are preparing for the second chance.  

 If big-name companies such as Samsung SDS, Hyundai Group, LG Group, and the STX Group, and their subsidiaries join the IPO movement, it would significantly increase the size of IPO market, further exceeding the current estimates. In fact, the Financial Services Commission (FSC) added 50 new growth companies and new energy companies to the list, which will further fuel into Korea`s IPO movement. Moreover, a few more listings are expected to be done through M&A deals by special-purpose acquisition companies (SPACs).

We could see a similar trend in neighboring IPO markets in Hong Kong and Shanghai, as global brands such as Prada and Samsonite and China`s gigantic life insurance companies prepare to kick off their IPO. This heated trend has made financial authorities speed up drafting specific guidelines so that monitoring institutions can properly handle firms accused of overpricing and control drastic price fluctuation. Detailed plans will be out soon.

Kiyeon Lee

(kiyeon.m.lee@gmail.com)

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