SEOUL, July 14 (AJP) - South Korea's tougher delisting rules are starting to shake up the stock market sooner than expected.
Less than two weeks after the new delisting regulations took effect on the South Korean bourse earlier this month, several companies listed on the junior KOSDAQ have already been flagged as at risk of being placed on the Korea Exchange's watchlist.
Under the regulations, which took effect July 1, companies whose market capitalization remains below 20 billion won (US$14.5 million) for 30 consecutive trading days must first issue a warning disclosure before they can be placed on the watchlist.
As of Monday, nine companies had issued such warnings, with five of them already placed on the watchlist. To remain listed, those companies must keep their market capitalization above the threshold for at least 45 consecutive sessions within a window of 90 trading days.
The regulations also strengthen monitoring of so-called "penny stocks," with companies whose shares close below 1,000 won for 30 consecutive sessions being placed on the watchlist.
Many smaller companies are scrambling to remain listed under the tougher measures, with some turning to share buybacks, private placements and stake sales to boost their market values. Those efforts, however, have only fueled heightened volatility.
Shares of KOSDAQ-listed electronics company Wellkeeps Hitech surged 71 percent over the past three sessions after it disclosed the risk of being placed on the watchlist, briefly pushing its market capitalization above 20 billion won last Friday. Its short-lived gains faded, with shares down 9.8 percent at 1,191 won as of early Tuesday afternoon.
Anxiety has also spread to online forums for investors. On one online board on Naver, the country's largest portal, dedicated to the company, one user questioned whether the company had much of a business at all, leaving a post that read, "What does this company even do?"
Another urged it to "learn from Hansung Enterprise," referring to the seafood company whose shares previously surged after retail investors piled in to help lift its market capitalization and save it from delisting.
Gold&S, an education services company, also showed a similar pattern. After an initial rally following its disclosure, the stock fell for five straight trading sessions and was trading down 14.4 percent at 1,239 won as of early Tuesday afternoon.
The sharp swings reflect a split between investors betting on a recovery and those avoiding stocks at risk of delisting.
As delisting fears grow, shareholders of smaller listed companies are increasingly seeking advice from major law firms on measures such as reverse stock splits, capital reductions, potential lawsuits and ways to avoid legal disputes during delisting.
Frustration among retail investors is also growing. Some blame companies for deteriorating to the brink of delisting, while others argue regulators introduced the stricter regulations too abruptly, leaving companies with little time to adjust.
Debates have now moved beyond stock markets and online forums, with retail investors turning to the National Assembly’s petition platform to voice opposition to recent capital market reforms.
A petition opposing tougher delisting rules had drawn nearly 3,000 signatures as of Tuesday, while another criticizing single-stock leveraged exchange-traded funds had gathered more than 31,000 signatures.
They argue that shrinking liquidity and the abrupt implementation of stricter regulatory measures, which are intended to improve market health by weeding out vulnerable companies, are putting excessive pressure on smaller firms.
Less than two weeks after the new delisting regulations took effect on the South Korean bourse earlier this month, several companies listed on the junior KOSDAQ have already been flagged as at risk of being placed on the Korea Exchange's watchlist.
Under the regulations, which took effect July 1, companies whose market capitalization remains below 20 billion won (US$14.5 million) for 30 consecutive trading days must first issue a warning disclosure before they can be placed on the watchlist.
As of Monday, nine companies had issued such warnings, with five of them already placed on the watchlist. To remain listed, those companies must keep their market capitalization above the threshold for at least 45 consecutive sessions within a window of 90 trading days.
The regulations also strengthen monitoring of so-called "penny stocks," with companies whose shares close below 1,000 won for 30 consecutive sessions being placed on the watchlist.
Many smaller companies are scrambling to remain listed under the tougher measures, with some turning to share buybacks, private placements and stake sales to boost their market values. Those efforts, however, have only fueled heightened volatility.
Shares of KOSDAQ-listed electronics company Wellkeeps Hitech surged 71 percent over the past three sessions after it disclosed the risk of being placed on the watchlist, briefly pushing its market capitalization above 20 billion won last Friday. Its short-lived gains faded, with shares down 9.8 percent at 1,191 won as of early Tuesday afternoon.
Anxiety has also spread to online forums for investors. On one online board on Naver, the country's largest portal, dedicated to the company, one user questioned whether the company had much of a business at all, leaving a post that read, "What does this company even do?"
Another urged it to "learn from Hansung Enterprise," referring to the seafood company whose shares previously surged after retail investors piled in to help lift its market capitalization and save it from delisting.
Gold&S, an education services company, also showed a similar pattern. After an initial rally following its disclosure, the stock fell for five straight trading sessions and was trading down 14.4 percent at 1,239 won as of early Tuesday afternoon.
The sharp swings reflect a split between investors betting on a recovery and those avoiding stocks at risk of delisting.
As delisting fears grow, shareholders of smaller listed companies are increasingly seeking advice from major law firms on measures such as reverse stock splits, capital reductions, potential lawsuits and ways to avoid legal disputes during delisting.
Frustration among retail investors is also growing. Some blame companies for deteriorating to the brink of delisting, while others argue regulators introduced the stricter regulations too abruptly, leaving companies with little time to adjust.
Debates have now moved beyond stock markets and online forums, with retail investors turning to the National Assembly’s petition platform to voice opposition to recent capital market reforms.
A petition opposing tougher delisting rules had drawn nearly 3,000 signatures as of Tuesday, while another criticizing single-stock leveraged exchange-traded funds had gathered more than 31,000 signatures.
They argue that shrinking liquidity and the abrupt implementation of stricter regulatory measures, which are intended to improve market health by weeding out vulnerable companies, are putting excessive pressure on smaller firms.
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