CEO discusses 2012 strategy, cross trading with Japanese exchange,
corporate reforms and CSR


Korea Exchange will accelerate its expansion into overseas markets this year, providing stock market solutions to strategic partners in Asia and elsewhere, its chief said.

“Korea Exchange has formed solid partnerships with Southeast Asian countries by offering its market solutions, and is already making progress in central Asia, as well,” Kim Bong-soo, chairman and CEO of the KRX, told The Korea Herald. “To upgrade the status of the Korean stock market, the overseas projects will be further expanded to other regions in 2012.”

Kim said that the KRX aims to make inroads in East Europe, Africa and Latin America in a bid to solidify its position as a key exporter of advanced financial solutions and technologies.

The KRX, which runs Korea’s main bourse the KOSPI and the tech-packed KOSDAQ, has sharpened its technological edge over the past years, and is now forging partnerships with stock market operators in other countries to help set up new bourses, modernize their systems and provide IT systems customized for stock markets.

The move comes as Korea’s financial industry at large is shifting its focus to other markets and high-profile Korean companies such as Samsung Electronics are drawing more positive attention on the global stage with their cutting-edge technologies.

The KRX’s IT solutions and stock market operation technologies are being provided to a growing list of countries including Malaysia, Vietnam, the Philippines, Cambodia, Laos and Uzbekistan.

In Laos, the KRX set up a joint stock market in October 2010, taking up a 49-percent stake. The Cambodian stock market is also a joint project with KRX, with the official launch scheduled within the first quarter of this year. In Malaysia, KRX won five contracts for bond trades and auditing systems. The KRX also grabbed a contract to develop a market monitoring system for the stock market in the Philippines in May last year.

“Within five years, investors around the world will be allowed to execute the trades of stocks and derivatives listed in all the major markets in real time on their own computers,” Kim said. “The Korea Exchange is pushing for cross trading alliances with other foreign stock markets to stay ahead in the integrated global financial markets.”

As part of such globalization efforts, the KRX signed a preliminary pact last month with the Tokyo Stock Exchange to introduce the cross trading system of listed stocks aimed at speeding up trading time and lowering costs for both Korean and Japanese investors. Under the deal, the KRX and the TSE started providing stock market data. The exchanges, which share the same opening and closing hours, are now working on the joint listing of the exchange-traded fund and derivative products.

Kim said the cross trading system was a complicated process.

“It may take some time, but the cross trading system with the Tokyo Stock Exchange will be done within this year,” Kim said.

In addition to the deal with the TSE, the KRX is in talks with the stock operator in Hong Kong, exploring a possible partnership for system development.

“The cross trading with other stock markets will help reduce the costs on the part of both investors and listed companies, while increasing the chance for discovering new business opportunities overseas,” Kim said.

Another pillar of the KRX’s expansion strategy is hosting of foreign companies on the local bourse. In 2011, the stock operator worked with local brokerages and other government agencies such as KOTRA to attract energy, infrastructure and financial firms in Turkey, Brazil and Kazakhstan.

Kim said the KRX is now focused on getting top-tier companies listed on the Korean market.

“It’s important to have blue-chip companies listed here, and we expect tangible results coming along from the second half of this year,” he said.

Asked about the initial public offering of the KRX, Kim said it was the Korean government that should make a policy decision to help the local exchange stay competitive on the global stage.

A growing number of stock exchanges have pulled off IPOs to better respond to alliance pacts and stake sharing with other stock market operators. The TSE is also pushing for the listing through the take-over of the listed Osaka Stock Exchange, creating the world’s third-biggest exchange.

“Given that the fast consolidation among major stock exchanges in the world, the listing of the KRX is necessary,” Kim said.

Kim, who took office two years ago, had to deal with the thorny task of restoring the battered reputation of the KRX.

“When my term started, the KRX was under fire over mismanagement, internal labor conflict and poor customer services,” Kim said.

Over the past two years, Kim has led a set of reform measures to streamline its management practices and improve the company’s public image.

His aggressive strategy worked. In 2011, the KRX underwent two major audits by the National Assembly and the Board of Audit and Inspection, and there was no negative review on the exchange’s management and operations. The labor conflict also subsided dramatically as the two labor unions were integrated into a single organization in December 2010. The exchange’s customer service level was at a rock bottom in 2010, but shot up to the top level in 2011, according to the government data.

Kim said the KRX is channeling more of its resources to corporate social responsibility activities. In March last year, it established KRX Happy Foundation, a non-profit organization designed to implement public projects including free financial education, personnel training and support programs in developing countries.

Kim said the KRX will inject an additional 40 billion won ($35 million) in the foundation to increase its total assets to 100 billion won.

“What matters these days is creating new jobs for youth and retirees. The KRX plans to recruit college students and experienced retirees for market monitoring and other exchange-related tasks,” Kim said.

As for Korea’s inclusion in the developed MSCI index, Kim said the local stock market meets the requirements in terms of trading volume and circulating liquidity, but he is not in a position to predict the exact timing.

“What I can say now is that the KRX is working closely with the government to improve the regulatory system here while holding investor relations events and conferences targeting foreign institutional investors,” Kim said.

The KRX also signed an agreement with MSCI Inc. to provide index-related data in October last year, raising public expectations that the Korea market would be promoted in the near future.

By Yang Sung-jin
(insight@heraldcorp.com)