Koreans have long been interested in the Chinese stock market, but now they are taking a real interest in their own market--to attract Chinese and other overseas companies.
By June 2006, Korean overseas stock investment reached a total of $44.2 billion, one quarter of which was invested in Chinese stock funds.
Although the Korea Exchange (KRX) does not have a branch in China, that is not affecting its progress in China.
"We normally spend half a month in Korea and half a month in China," said employees from the KRX, who are busy commuting between Korea and China, and their hard work has paid off, with 13 companies currently having signed managing underwriter agreements with KRX.
Han Chang-Woo, Chief Representative-Asia of KRX, explained that at present, Chinese companies that KRX is attempting to list are mainly in manufacturing industries including textiles, information technology, mining, chemistry and fertilizer. In 2007, between 10 and 20 Chinese companies will be listed on the KRX.
A short history of KRX
KRX came into being on January 27, 2005, as a result of the merging of the Korea Stock Exchange, the Korea Futures Exchange and KOSDAQ. According to statistics, the KRX achieved extraordinary results in its first year, with the total transaction volume and total market value in 2005 ranked as the ninth and the 14th respectively in the world. In addition, turnover exceeded 230 percent due to strong liquidity, ranking it the second in the world.
As a general financial market, the KRX includes the following trading products: stocks, ELW (equity linked warrants), bonds (government bonds, corporate bonds, convertible bonds), stock index futures, stock options, funds and investment trusts, foreign exchange futures, interest rate futures and gold futures. Since the opening of ELW market in December 2005, accumulated transaction volume has reached 38 trillion Korean won; or $40.4 billion, ranking it the second in Asia after Hong Kong. By the end of 2006, the volume of options traded in Korea ranked it as the world's No. 1.
The Korean stock market is famous for its "40 percent foreign investor" shareholding of the total stock market value. This internationalized and diversified equity structure is beneficial for foreign companies to gain stable and continuous financing channels and to realize equity diversification.
"When the reality changes, the rules change. Policies are made to serve the market," said Kang Young-Seong, Representative-China of KRX. In order to attract foreign companies, especially Chinese companies, to list on the Korean stock market, Korea, from the end of 2005, began to allow foreign companies to launch IPOs and to be listed on the KRX. In addition, there is no limit to the initial financing amount. Companies can set an issuance price of their own. Prior to this, policies stated that the Korean stock market could only act as a secondary stock trading market for foreign companies.
Moreover, KRX has quickly introduced many favorable policies to streamline the listing procedure for foreign companies looking to list in Korea. For example, the listing period has been reduced to six months.