New Korean SME exchange makes push to raise investor tempo

Korea is striving to promote its fledgling stock market that opened this month.

Korea is striving to promote its fledgling stock market that opened this month.

At the beginning of July, the Korea New Exchange (KONEX) was launched by the Korea Exchange , a new stock market designed to help raise equity funding for early stage and venture capital-style companies.

This week, Korean prime minister Hongwon Chung visited the exchange and commented that the government planned to support the development of small and medium-sized enterprises via KONEX.

Yesterday, CEOs from all the 21 companies listed on the new exchange held an event in Seoul trying to drum up interest in their businesses. It was attended by angel investors, venture capitalists and institutional investors.

Only institutional investors and individuals with over 300 million won (approximately US$250,000) are allowed to invest directly in KONEX stock. No index figure for the exchange is yet available. That number will be calculated and published in due course.

The rationale behind setting up KONEX was to give younger companies the environment to raise equity capital and move away from bank lending. The companies listed include several biotech firms, chip makers, auto-part manufacturers and software firms.

Companies that secure a listing on the secondary KOSDAQ market, which is tilted towards technology companies, are on average just shy of 15 years old. The concept for KONEX is to accommodate firms at a time around their tenth birthday. Alumni could then gravitate up to the secondary market after spending several years trading on KONEX.

The 21 firms included on KONEX were pulled from a list of potential candidates drafted by ten leading Korean securities houses. The latter have been recognised by the Korea Exchange as ‘authorised supervisors’ for KONEX and were required to analyse and supervise their nominations. All companies listed on KONEX have to have an authorised supervisor. The intention is to have a roster of 50 companies by the end of this year.