South Korea’s Financial Services Commission (FSC) has announced a raft of measures aimed at revitalising the Korea New Exchange (KONEX) stock market.
Founded in July 20123, KONEX was formed to facilitate early-stage SMEs and startups to raise funds prior to listing on the KOSDAQ market. Between 2013 and 2021, the number of listed companies on KONEX – as well as the daily average transaction total – increased substantially, while the amount of businesses successfully transitioning from KONEX to KOSDAQ grew steadily.
Despite this, the number of newly listed enterprises on KONEX has been falling in recent years as companies are preferring to list directly on KOSDAQ as well the expanded availability of alternative investment assets. Low liquidities in the market have also recently led to underwhelming transactions.
According to the FSC, the new measures are aimed at promoting the KONEX market by offering more incentives for companies to list on it, lowering entry barriers and easing requirements for investors as well as creating a scale-up fund worth up to KRW100 billion to be invested in KONEX-listed firms.
The first measure is to promote new listing by improving rules to help make the transition to KOSDAQ easier. The FSC said it plans to ease the currently applied financial requirements on KONEX-listed firms for the ‘fast-track’ transition to KOSDAQ and also create further tracks for KOSDAQ listing based on the firm’s market capitalisation and liquidity levels. Furthermore, compliance burdens associated with disclosure, accounting management and designated consultant fees will be lowered for KONEX-listed businesses.
The second key measure is to remove barriers and ease investor requirements. Currently, KONEX market investors face restrictive investment conditions on markets such as the KOSDAQ, KOSPI and K-OTC, with minimum deposit rulings requiring investors park at least KRW30 million to enter the market.
The FSC remarked that these requirements ‘have been deemed inappropriate’ when considering similar investment rules on other markets, therefore they plan to abolish these rules on minimum deposit amount and small-sum investment account.
Strengthening support for listed firms is the third measure introduced by the FSC. The Commission said a KONEX scale-up fund will be launched in the amount of up to KRW100 billion to be invested in the KONEX-listed firms and to help pump-prime their fundraising efforts. In addition, the Korea Exchange will offer support for KONEX-listed businesses by giving them consulting on KOSDAQ listing strategies, making the tech evaluation process easier and granting them listing fee exemptions.
The measures will begin to be implemented in the first quarter of 2022.
In August 2021, the FSC revealed it is to establish a virtual asset division within the Korea Financial Intelligence Unit.
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