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KRX CEO pledges to turn Korea discount into premium

Global investors eyeing Korea to de-risk from China: Jeong Eun-bo

By Im Eun-byel

Published : May 26, 2024 - 14:01

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Korea Exchange CEO Jeong Eun-bo speaks at a press conference held at the bourse operator's office in Yeouido, western Seoul, Friday. (Korea Exchange) Korea Exchange CEO Jeong Eun-bo speaks at a press conference held at the bourse operator's office in Yeouido, western Seoul, Friday. (Korea Exchange)

The chief of Korea Exchange, the country's sole bourse operator, vowed Friday to boost the market valuation of companies listed on the local stock market with a seamless backup of the country’s “corporate value-up” directive.

During a press conference commemorating his first 100 days in office, Korea Exchange CEO Jeong Eun-bo said the country's stock market is in dire need of tackling its perennial discount to turn it into a premium.

“The Korea discount exists. Listed companies, however, have also lacked efforts in (exhibiting exemplary) corporate governance and shareholder-friendly policies. The companies must overcome the shortcomings through voluntary participation,” he said during the event held at the exchange’s Seoul office.

The term "Korea discount" refers to the tendency of companies listed here to have lower market valuations than their global peers. In February, local authorities introduced a set of measures named the “corporate value-up program,” encouraging listed companies to uplift their share prices.

At the press event, Jeong suggested four pillars of growth for the Korea Exchange: supporting the corporate value-up directive, offering fair asset management opportunities for individuals, securing future growth engines, and communicating with investors in and out of Korea.

To boost the local stock market, the Korea Exchange will remove insolvent companies, also known as “zombie companies,” from the listing.

“There are around 2,600 listed companies in Korea,” Jeong said, referring to the figure from end-2023.

“The number is relatively high compared to major developed countries, considering the difference in the size of economies. Assets are tied up in zombie companies. They must be cleared out,” he said.

The current four-year period of improvement for Kospi-listed firms on the brink of delisting will be shortened to two years.

One of the agenda items for growth is to directly manage nighttime trading for derivatives, which is currently being operated by Eurex, the largest European futures and options market.

Through the Korea Exchange’s direct operation, investors will be able to execute transactions on the KRX system under Korean regulations instead of German, the bourse operator explained.

The KRX also wishes to increase communication with foreign investors, in response to their interest in the Korean stock market following the value-up program introduction.

“The value-up program could be the momentum needed to bring the foreign assets to Korea,” he said.

“Having visited Tokyo and New York to boost investor relations earlier this month, I learned many institutional investors are interested in Korean shares. Some are showing interest in Korea as the next investment destination after retrieving the assets involved in China,” Jeong explained.

He further introduced a plan to launch a unit for future business opportunities for the bourse operator.

"Foreign exchanges are working on developing a diverse source of income, more than merely relying on brokerage commissions,” he said.

“We must make efforts to monetize our indices and data, especially at a time when a new alternative trading system is about to be introduced,” he said, referring to Nextrade ATS which is set to be launched here in Q1 2025.

While market eyes are on the timing of lifting the country’s short selling ban, after the presidential office rebuffed Financial Supervisory Service Gov. Lee Bok-hyun’s comment on the resumption of the practice in June, Jeong said the monitoring system for illegal short selling detection is currently under development.

"We are in charge of developing a monitoring system to detect illegal short selling. It could take about a year, perhaps 10 months at the earliest. But the early introduction is not as important as the system's stability," he said.