[Deputy Editor's Column] The Spring of KONEX

[Asia Economy Reporter Song Hwajeong] The stock market heated up more than ever in the first half of this year. The market, which had been strong since the beginning of the year on expectations of improved earnings compared to the previous year, experienced a historic plunge due to the unexpected variable of the novel coronavirus infection (COVID-19). However, it rebounded strongly with the help of policy support, recovering the losses. During the COVID-19 market conditions, the enthusiasm of individual investors, known as the Donghak Ant Movement, was hotter than ever, and untact (non-face-to-face) related stocks attracted attention as promising theme stocks.

Despite the stock market heating up like this, the sentiment around KONEX remains lukewarm. This year, the number of KONEX-listed companies was only three, maintaining the same level as last year. The number of companies transferring from KONEX to KOSDAQ was one, down by half from two during the same period last year. The number of new listings on KONEX has been decreasing every year. It dropped from 50 cases in 2016 to 29 in 2017, 21 in 2018, and remained at 17 last year. The number of KONEX-listed stocks slightly decreased from 151 at the beginning of the year to 148 last month. Market capitalization also declined from 5.4143 trillion KRW in January to 4.8345 trillion KRW last month.

Signs of improvement are also visible. This is because KONEX’s trading volume and trading value have increased. The average daily trading volume on KONEX rose from 378,878 shares in January this year to 646,203 shares last month. The average daily trading value also increased from 2.18654 billion KRW in January to 3.59477 billion KRW in May. The market capitalization turnover rate, which indicates stock market liquidity, improved from 0.81% in January to 1.44% in May.

Since the financial authorities have been driving measures to revitalize KONEX since the beginning of last year, it can be interpreted that the effects are gradually appearing, albeit slowly. Since April last year, the financial authorities lowered the basic deposit requirement for general investors from 100 million KRW to 30 million KRW to activate the KONEX market. They also improved the block trading system to facilitate large-scale transactions and completely revamped the KOSDAQ fast-track transfer listing system.

As part of these revitalization measures, the Korea Exchange started a KONEX market activation support project on the 21st of last month, which subsidizes part of the costs required for listing and maintaining listings on the KONEX market using government funds. This project supports listing costs within a total limit of 1.235 billion KRW for newly listed KONEX companies this year that operate in three key growth industries?bio, future automobiles, and non-memory semiconductors?or are venture companies, selecting eligible companies on a first-come, first-served basis. Since the project began, one company has applied, and inquiries from companies continue, so the number of applicants is expected to keep increasing. This is anticipated to lead to an increase in the number of listed companies.

The KONEX market, which will turn seven years old on the 1st of next month, has suffered from debates about its usefulness and has experienced ups and downs. We hope that spring will come to KONEX as well through more active revitalization measures.