Hello, everyone. Here are bunch of happy news of reforming capital market. There has been need for boosting real economy amid growing uncertainty of external and internal economy. In a part of an effort to support real economy, Financial Service Commission (FCS) approved revised bill Korea Exchange asked for an approval. These reforms are expected to help revitalizing economy, improving capital market function of financing funds for companies. This reform includes support for small and mid-sized company, easing listing rules for foreign companies and easing burdens of entering stock market. Let me introduce details on the reform. The FSC’s decision came as South Korea’s stock market has seen a slump with few companies being able to secure capital amid the protracted downturn.
First of all, upon the FSC’s decision, the Korea Exchange will open a new stock market, Korea New Exchange (KONEX) by the first half this year to support small and mid-sized companies in raising capital and selling shares. SMEs will be allowed to enter the KONEX if they get a proper auditing assessment and meet certain balance sheets conditions. Also, the company on KONEX should designate consultant. This is for coaching starting up companies by proving information and advices. What the better is that companies on KONEX will find it easier to move to KOSDAQ as the listing rule of KODAQ will be eased for KONEX listed firms. Public disclosure rules of the KONEX is much softer than KOSDAQ those of existing stock markets.
For KOSDAQ market, candidates that have been listed for more than five years in offshore markets under an exchange agreement with the Seoul financial authorities will be exempted from listing evaluation. They will need to have a market cap of 2 trillion won or more, with an annual net profit of at least 3 billion won. The FSC also plans to allow a company seeking listing on the KOSPI to change its controlling shareholder one year before the listing, which has so far been strictly banned by the regulator. Companies wanting to be listed on the secondary KOSDAQ market will be allowed to raise unlimited money through rights offerings just before and after they go public. These are aiming for establishing KODAQ’s identity and leading high-tech and innovative companies to be listed.
Also, there are measures for improving global competitiveness. Korean stock market has reached at world level through continuous reform of system and the effort from market participants. However, there still remain things to improve compared to the other major countries. Particularly, KOSDAQ market is weak so that its function of supplying risk capital to growing company is hampered. To solve these remaining problems, the FSC will exempt overseas firms from listing evaluation if they meet certain criteria that qualify them to be considered blue-chip companies.
In short, the FSC will support small and medium sized company that has started business by opening new stock market named KONEX. The KONEX is expected to provide customized financial aids for those enterprises. Secondly, new rules will alleviate company’s burden of listing, not harming protection of investors. Lastly, new rules will identify each stock market’s functions to support real economy. All these measures are expected to help improvement of Korea’s stock market and real economy as well. The revised rules are to gradually take effect from February 28th.
By Park Soojeong (firstname.lastname@example.org)