South Korea’s financial authorities are divided over the entry barrier to the venture-driven stock market launched last month, sources said Tuesday, casting a pall over the market’s growth down the road.
According to the sources, the Prime Minister’s Office recently requested the Financial Services Commission, the top financial regulator, to lower the entry barrier to the Korea New Exchange market, a new bourse for start-ups.
“The KONEX needs short-term support in the initial stages to foster the market, rather than long-term policies,” Prime Minister Chung Hong-won said.
The request came as only institutional investors or an individual with a deposit of more than 300 million won ($269,200) is currently allowed to participate in the market, which is considered to be a major drag in fostering the young bourse.
The KONEX market was officially launched on July 1 to foster the growth of young venture firms and lend support to the government’s “creative economy” vision, which aims to bolster the growth of small firms and start-ups in a country where conglomerates dominate the economy.
The FSC, however, said the current entry barrier must be maintained for stability, adding that the KONEX market bears higher risks than other bourses.
“(The FSC) is not considering easing the existing entry barrier, as it is only one month old,” an official from the FSC said. “Such decisions must be made in a careful manner, as it can lead to side effects.”
The bourse operator Korea Exchange echoed the view, adding that it is taking a wait-and-see approach on amending KONEX market rules as easing the entry barrier can have an adverse impact on investors.
The KONEX market saw its market capitalization reach 497.3 billion won on July 30, a tad higher than 468.8 billion won tallied on July 1, the KRX data showed.
The average daily trading volume came to 446.89 million won in July, falling sharply from the 1.3 billion won posted on the first trading day on the market, the data showed.
Only two of the shares were traded in every trading session last month, while a handful of stocks were bought and sold in fewer than four trading days, reflecting the stagnant trading activities in the market. (Yonhap News)
