The Korea New Exchange (KONEX) has suffered from sluggish trading as the bourse has failed to attract companies and investors
October 9, 2013 Leave a comment
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.”
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