The Korea Exchange designated 36 stocks as managed stocks on August 12. These companies either failed to maintain a stock price above 1,000 won or did not meet the market capitalization requirements for listing. This marks the first large-scale action under the revised listing regulations that took effect last month. Observers predict that the number of managed stocks could rise to around 100.
For a long time, the Korean stock market, particularly KOSDAQ, has operated under a structure characterized by a high number of listings but a low rate of delistings. Over the past 20 years, 1,353 companies have been newly listed, while only 415 have been delisted. The result? Despite KOSDAQ's market capitalization increasing 8.6 times during this period, the index itself has only risen 1.6 times.
The presence of failing companies in the market has weighed down the index, making it difficult for investors to expect reasonable returns. The long-standing stigma of the 'Korea Discount' is closely tied to these structural issues.
Low-value stocks are a symbolic example of this problem. Stocks with extremely low prices are highly volatile and often become targets for price manipulation, leading to significant losses for individual investors. It is no coincidence that some of the stocks designated as managed were previously associated with themes like inter-Korean economic cooperation. Stocks that fluctuate wildly based on news, regardless of their performance or growth potential, have long eroded market trust. The current measure to filter out stocks that fail to meet market capitalization requirements is a step toward establishing minimal market discipline.
However, there are concerns. Recently, single-stock leveraged products, particularly in the semiconductor sector, have drawn significant capital, causing a sharp decline across the index. KOSPI fell over 40% in just over a month, while KOSDAQ dropped about 37%. Some companies designated as managed stocks may feel unjustly treated.
Yet, such concerns should not undermine the integrity of the system itself. If some companies are caught unfairly due to market volatility, this can be addressed through individual appeals or review processes, but it should not dilute the core standard of '45 consecutive trading days.'
Experience has shown that if standards are lax, companies will find ways to exploit loopholes. In fact, there are already signs that some companies are attempting to evade the requirements through stock consolidations or reductions.
Thus, the future is crucial. Authorities and the exchange must continue to refine measures to prevent 'deceptive exits' that merely meet formal requirements. If companies can escape being classified as managed stocks by simply changing their stock price numerically without addressing underlying issues, this reform will be half-hearted.
Additionally, it is essential to establish proper thresholds for both 'exit' and 'entry.' As failing companies are swiftly removed, it is equally important for companies with sufficient growth potential and innovation to enter KOSDAQ to create a healthy ecosystem.
The recent mass designation of managed stocks and the subsequent delisting procedures may be painful, but expecting change without discomfort is unrealistic. Authorities must steadfastly uphold principles, and listed companies should seize this opportunity to transform into solid enterprises with strong performance and growth potential. This is the first step toward a healthier KOSDAQ.
* This article has been translated by AI.
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