In a significant development for the South Korean financial markets, the government has decided to postpone the increase in the KOSDAQ delisting market capitalization threshold from 200 billion to 300 billion won by six months, now set to take effect in July next year. This decision was made during a market situation assessment meeting chaired by Deputy Prime Minister and Minister of Economy and Finance, Ku Yun-cheol, which took place on September 4 at the Korea Federation of Banks in Seoul.
The initial plan aimed to enhance the delisting criteria as part of a broader initiative to expedite the exit of underperforming companies from the KOSDAQ. However, the announcement faced pushback from various stakeholders within the KOSDAQ industry, coupled with a deteriorating market environment, prompting the government to reconsider the timing of these changes.
As it stands, since July, the KOSDAQ delisting threshold has already been increased from 150 billion to 200 billion won. The original timeline envisioned an additional hike to 300 billion won for KOSDAQ and 500 billion won for KOSPI starting in January 2024. Nonetheless, taking into account the industry’s concerns and the recent downturn in the KOSDAQ market, this timeline has been adjusted.
The Financial Services Commission (FSC) has reported that as of August 26, there are approximately 200 companies within the KOSDAQ that have a market capitalization between 200 billion and 300 billion won. Additionally, to further alleviate the burden on companies facing delisting, firms that meet specific financial criteria will now be permitted to transition to the K-OTC market without undergoing the typical liquidation trading process.
The K-OTC market was established to support small and medium-sized enterprises (SMEs) and venture companies, offering them a platform for capital raising that is less stringent than that of the KOSDAQ and KOSPI. This initiative aims to mitigate the impact of delisting on businesses and stabilize the market amidst ongoing fluctuations.
At the same meeting, the government also addressed the recent rise in bond yields and the implications of increasing national debt issuance. Participants noted that rising interest rates are being influenced by various factors, including the issuance of government bonds in other nations, corporate bond offerings from global AI firms, expectations of policy rate hikes by major economies, and rising international oil prices due to tensions in the Middle East.
In light of these challenges, the government has committed to closely monitoring market conditions to prevent excessive volatility while ensuring that financial stability is maintained. Stakeholders discussed the current state of vulnerable borrowers and the health of the mutual finance sector, with most indicators showing a relatively sound status. However, there was a consensus that a significant spike in interest rates could escalate the financial burden on at-risk borrowers and pose risks to the overall stability of the financial sector.
The government is determined to continue supporting vulnerable borrowers while also persistently evaluating the health of the financial market and the banking sector. This proactive stance aims to navigate the complexities of a dynamic economic landscape while safeguarding the interests of both investors and companies alike.
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