KRX considering new index to keep firms on KOSDAQ

The Korea Exchange (KRX) is considering developing an index composed of large shares from the KOSPI and the KOSDAQ, according to the exchange Tuesday.

This move is aimed at further preventing tech shares listed on the KOSDAQ from relocating to the main bourse, it added.

“The idea for an integrated index came about as the issue surfaced of Celltrion seeking a relisting on the KOSPI,” a KRX official said.

Celltrion, a KOSDAQ-listed biosimilar pharmaceutical company, recently announced it would hold a shareholders meeting later this month and decide whether to exit the KOSDAQ and relist on the KOSPI.

It is most likely expected to vote on the KOSPI relisting, following Kakao’s move to the benchmark index.

Celltrion is currently the No.1 KOSDAQ company with a market cap of 14 trillion won.

Should it decide to go to the KOSPI, the tech-heavy index will further lose grounds as a platform for emerging companies.

The KRX is looking to model its new index on the JPX-Nikkei 400 index, which is composed of 400 listed Japanese companies with sound governance.

The Japan Exchange Group, Tokyo Stock Exchange and Nikkei launched the index to revitalize Japan’s stock market in 2014.

The KRX said it may come up with an index like the JPX-Nikkei 400 by the end of this year.

However, it could take longer since it would have to run test simulations before its actual launch.

A number of tech companies have relocated to the KOSPI over the past decade.

Korea’s biggest search portal Naver, the country’s second-biggest game developer NCSOFT, leading travel agency Hana Tour, and major carrier Asiana Airlines are among those that relisted their shares on the main bourse.

Kakao, the most-used mobile messenger here, also moved its shares to the KOSPI two months ago, and got included in the KOSPI200, which is composed of 200 blue chips, including Samsung Electronics.

When tech shares became bigger, those that had the potential to be representative KOSDAQ stocks took the chance to relist on the KOSPI.

The reasons for relocating to the KOSPI vary.

The companies say they wanted to be valued fairly, the KOSDAQ was too volatile, and listing on the KOSPI would help boost their brands.

The KOSPI relisting helped their shares perform better, with their fundamentals reflecting earnings rather than being swayed by the KOSDAQ’s volatility.

For instance, Kakao shares reached record highs a number of times since relisting on the KOSPI, with some analysts cautioning investors of the company’s overvaluation.