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IPO market attracts record subscription deposits in 2020

An electric board at the Korea Exchange shows Big Hit Entertainment’s market debut on the nation’s main bourse, Kospi, Oct. 15. (Korea Exchange)
An electric board at the Korea Exchange shows Big Hit Entertainment’s market debut on the nation’s main bourse, Kospi, Oct. 15. (Korea Exchange)

The local initial public offering market was all the rage in 2020 as nearly 300 trillion won ($272.9 billion) poured in, three times more than 2018 or 2019, according to industry data on Sunday.

This year’s IPO market will come to a close with materials firm Sukgyung AT making its debut on Wednesday.

Other than special-purpose acquisition companies and companies that merged with listed firms, a total of 76 companies were newly listed on the nation’s main Kospi and secondary Kosdaq markets. The combined amount raised via the IPOs stood at 5.7 trillion won, while subscription deposits came to 295.5 trillion won this year. The combined total of IPO deposits for new shares this year was nearly three times higher than in 2018 or 2019, when 78 and 76 firms went public, respectively, amounting to 100 trillion won each year.

The sum of this year’s IPO deposits also outweighed the combined market capitalization of the nation’s top five firms excluding Samsung Electronics. The combined market cap of the firms, including SK hynix, Hyundai Motor Group and Naver, came to 291 trillion won as of Friday. The 295.5 trillion won in deposits was more than half of the nation’s 558 trillion won annual budget allocated for next year.

While only one IPO attracted more than 5 trillion won worth of deposits in 2018 and one in 2019, 12 IPOs did so this year. Mobile gaming publisher Kakao Games and the company behind K-pop band BTS, Big Hit Entertainment, lured 58.5 trillion won and 58.4 trillion won, respectively, followed by 30.9 trillion won deposited for pharmaceutical firm SK Biopharmaceuticals’ new shares.

The record set this year is largely attributable to the so-called “Donghak” investment movement driven by retail investors, according to market watchers.

“IPOs of well-known companies made a buzz in the market, and retail investors that had been hesitant to make direct investments started to participate in the IPOs because of high liquidity in the market,” said Jeong Myung-ji, an analyst from Samsung Securities.

Riding the wave in the IPO market, companies including game developer Krafton, drug manufacturer SK Bioscience and electric vehicle battery maker LG Energy Solution are scheduled to make their market debuts next year.

Meanwhile, local brokerages predict that the domestic stock market will gain momentum in overcoming the impact of the still ongoing coronavirus crisis thanks to low interest rates and a global economic recovery.

“The nation has fared well in the fight against the coronavirus pandemic, and its stock market therefore will benefit from the global economic recovery as it will be underrated as before,” Kang Song-cheol, an analyst from Shinhan Investment, said.

Shinhan Investment anticipates that the Kospi index will remain in the range between 3,150 and 3,200, up from the previous estimate of 2,100-2,700 in end-October.

Other domestic stock trading houses, including Hanwha Investment & Securities and Hi Investment & Securities, expected the Kospi target band  of 2,100 and 3,000 points, up from its 2,100-2,700 points forecast in late October.

By Kim Young-won (
catch table
Korea Herald daum