In a significant policy shift, the South Korean government has announced reforms aimed at easing the stringent listing criteria that have placed certain profitable companies at risk of delisting from the KOSDAQ stock exchange. This initiative comes in light of rising concerns from the business community regarding the fairness of delisting purely based on market capitalization. The Ministry of Economy and Finance and the Financial Services Commission convened on the 4th of this month to unveil these proposals during a market situation assessment meeting, reflecting an increasing recognition of the challenges faced by smaller enterprises in the current economic climate.
Previously, the threshold for delisting on the KOSDAQ was set at a market capitalization of 150 billion KRW, which was raised to 200 billion KRW in July. However, the ongoing downturn in the KOSDAQ has prompted calls from the corporate sector for a reevaluation of this standard. Many argued that it is excessively harsh to delist companies that, despite having a low market cap, demonstrate financial viability and profitability. As a result, the government has opted to allow firms that meet specific financial criteria to transition to the KONEX market, designed specifically for small and venture businesses, instead of facing delisting.
Under the new provisions, companies that have recorded a net profit in two out of the last three fiscal years, or those that have achieved a profit in one year and possess a capital base exceeding 20 billion KRW will qualify for this alternative listing route. Meanwhile, firms that find themselves in a capital deficit will be exempt from this option, ensuring that only financially stable enterprises can benefit from this measure. When these firms move to KONEX, they can retain their existing share prices without going through the typical process of a trading halt.
Furthermore, the government has decided to postpone the planned increase in the market capitalization threshold for delisting from KOSDAQ, which was originally set to take effect on January 1. This extension allows for a six-month period of reflection before raising the limit from 200 billion KRW to 300 billion KRW in July 2024. The same considerations will apply to KOSPI-listed companies, with the threshold moving from 300 billion KRW to 500 billion KRW, also postponed to July.
Amid these changes, the meeting participants also commented on the recent turbulence in the global bond markets, noting that increased government bond issuances worldwide, coupled with rising corporate bond offerings from major global AI firms and heightened geopolitical tensions, have contributed to ongoing pressures on interest rates. They acknowledged that the expectation of rising policy rates in several countries, compounded by recent fluctuations in oil prices, has resulted in sustained upward pressure on borrowing costs.
In response to these challenges, the government has committed to closely monitor the domestic bond market to prevent excessive volatility. While the current financial status of vulnerable borrowers and the health of mutual finance institutions remain relatively stable, there are concerns that a significant rise in interest rates could exacerbate their difficulties. The government reiterated its commitment to implementing measures designed to support these at-risk borrowers, ensuring that the necessary assistance is delivered without delay, as announced on the 28th of last month.
This latest move by the South Korean government highlights its recognition of the unique challenges faced by smaller enterprises in a volatile market and underscores a commitment to fostering a more supportive environment for growth and stability within the nation’s financial ecosystem.
[관련기사] https://n.news.naver.com/mnews/article/028/0002821645?sid=101
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