The Korea New Exchange (KONEX) has suffered from sluggish trading as the bourse has failed to attract companies and investors

2013-10-08 17:15

KONEX struggles to attract investors

By Yi Whan-woo
The Korea New Exchange (KONEX) has suffered from sluggish trading as the bourse has failed to attract companies and investors. The country’s third stock market was launched on July 1 to help the start-ups and venture companies draw investors under the Park Geun-hye administration’s creativity-based economic paradigm. According to the Korea Exchange (KRX), Monday, the average daily trading volume at the KONEX stood at 222 million won in September, a pittance of the main KOSPI’s 4.46 trillion won and the tech-heavy KOSDAQ’s 1.59 trillion won.It is even less than the daily trading amount of 224 million won for Polyvision, the 981st company on the KOSDAQ by market capitalization.
The daily average number of shares changing hands at the third market also fell to 26,878 shares, around one third of 71,030 shares recorded when it opened.
The key reason for such poor performance is that there are few companies listed on the market that can appeal to investors.
“There are only a limited number of choices for investors. It’s hard to vitalize the market because there are not many attractive companies,” a market analyst said.
The KRX said it would take time for the newly-established stock market to perform better, although it admitted it needs to attract more qualified SMEs in various business areas.
Of the 24 listed companies, seven firms such as Hironic and LabGenomics Clinical Laboratories are engaged in medical equipment manufacturing or biotechnology, according to the KRX. Four others are in the semiconductor business, while three others are in software, it added.
“It takes up to four months to find a prospective SME or a venture firm and screen it to see if it qualifies to be listed on the KONEX,” a KRX official said on condition of anonymity.
Each company listed on the KONEX is required to meet one of three conditions: at least 500 million won in equity capital, a minimum of 1 billion won in annual sales, or at least 300 million in net profit.
“It’s too early to say the KONEX is a failure,” he said.
When asked why the tech-savvy KOSDAQ had more than 300 firms listed in its opening year in 1996, he said such a comparison was “inappropriate.”
“The establishment of the KOSDAQ came following the active off-board transactions of stocks of technology companies in the early 1990s,” he said. “The strong performance of the KOSDAQ in its first year is attributed to this.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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