Korea Exchange announced major reforms for the KOSDAQ market on its 30th anniversary, implementing stricter delisting criteria expected to remove approximately 50 companies this year. The regulatory overhaul targets so-called 'penny stocks' (stocks below 1000 won) and underperforming tech-listed firms to restore market credibility. The reforms respond to persistent concerns that KOSDAQ has become a 'retail investor trap' dominated by low-quality listings despite reaching a record market capitalization exceeding 600 trillion won in January. Korea Exchange stated the measures aim to eliminate delayed exits of distressed companies that have been exploited for unfair trading practices. The initiative coincides with KOSDAQ's anniversary since its July 1, 1996 launch as Korea's venture capital market modeled after NASDAQ.
Korea Exchange Tightens Delisting Rules for KOSDAQ Stocks
Korea Exchange implemented revised listing regulations raising delisting thresholds for technology special-listing companies and penny stocks. Under the new penny stock criteria, companies whose share price remains below 1000 won for 30 consecutive trading days will be designated as watchlist stocks. These companies must recover to 1000 won or above for 45 consecutive trading days within a 90-trading-day window to avoid delisting. Choi Ji-woo, Executive Director of Korea Exchange's KOSDAQ Market Division, stated: "Delayed exits of distressed companies have repeatedly enabled exploitation as instruments for unfair trading, leading to the perception that KOSDAQ is a market difficult to trust for investment."
The exchange applied these standards as follow-up measures to its recently announced KOSDAQ Trust and Innovation Enhancement Plan and Capital Market Structural Improvement Plan. The reforms specifically strengthen delisting requirements for technology special-listing companies that previously enjoyed looser criteria. Korea Exchange projects approximately 50 KOSDAQ companies will face delisting under the updated rules this year.
KOSDAQ Expands Tailored Review for Innovation Sectors
Korea Exchange expanded its customized qualitative review standards beyond the existing ABCD sectors (AI, Bio, Chip, Defense/Space) to include advanced robotics, K-content, and cybersecurity industries. Lee Seok-woo, Team Leader of Korea Exchange's Technology Company Listing Division, stated: "This will enhance predictability for high-growth-potential companies and support fundraising for innovative industries. Reviews tailored to industries distinct from traditional manufacturing will strengthen IPO market trust and investor protection." The exchange plans to develop additional tailored review criteria for mining and other innovative industries in the second half of the year, considering industrial demand.
The exchange aims to replace exiting distressed companies with innovative technology firms to enhance market competitiveness. The expansion follows the existing framework applied to technology special-listing companies, extending sector-specific evaluation methods to a broader range of emerging industries.
Korea Exchange Plans KOSDAQ Select Tier System
Korea Exchange announced plans to introduce a tiered market structure tentatively named 'KOSDAQ Select' to shed the secondary market image and attract institutional investors. The initiative addresses criticisms that the absence of quality differentiation mechanisms has led to undervaluation of high-quality companies. The tier system aims to separate companies by quality metrics, enabling institutional capital to identify investment-grade firms more easily.
Eom Min-yong, researcher at Shinhan Investment & Securities, analyzed: "While financial authorities are promoting a KOSDAQ tier system, the environment is forming where representative companies can expect institutional fund inflows within KOSDAQ itself, whereas KOSPI transfer was previously the natural choice for growth companies." Na Seung-doo, researcher at SK Securities, stated: "This will improve the soundness and fundamental strength of the Korean stock market, and the impact on total market capitalization from confirmed delistings is effectively minimal," while adding: "Sufficient protective measures for investors in over 200 candidate companies across KOSPI and KOSDAQ must also be implemented in parallel."
KOSDAQ launched on July 1, 1996 as a funding market for small and medium-sized venture companies, positioning itself as Korea's answer to NASDAQ. The market reached its historical peak index of 2834.40 in March 2000 during the dot-com bubble, serving as the growth stage for major Korean venture companies including Daum, Naver, and NCSOFT. The index plummeted to the 300-400 range by 2004 following the global IT bubble collapse. Market capitalization grew from 7 trillion won at launch to over 600 trillion won in January this year, with listed companies expanding from 341 initially to 1827 as of end of last year. The index broke above 1000 on January 26 this year and briefly exceeded 1200 on April 24 for the first time since August 2000, but has since retreated to the 860 range.
FAQ
What delisting criteria did Korea Exchange implement for KOSDAQ penny stocks?
Korea Exchange set a rule that stocks trading below 1000 won for 30 consecutive trading days will be designated as watchlist stocks, and must recover to 1000 won or above for 45 consecutive trading days within 90 trading days to avoid delisting.
How many KOSDAQ companies are expected to be delisted under the new rules?
Korea Exchange projects approximately 50 KOSDAQ companies will face delisting this year under the strengthened criteria for technology special-listing companies and penny stocks.
What is KOSDAQ Select and when will it be introduced?
KOSDAQ Select is a planned tiered market system to separate KOSDAQ companies by quality levels, designed to attract institutional investors and address undervaluation of high-quality firms. Korea Exchange announced the plan with additional sector criteria scheduled for development in the second half of the year.
