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The chairman of South Korea's bourse operator, Korea Exchange (KRX), said the current concentration in semiconductors is "natural," driven by supply and demand, while also outlining measures to revamp the tech-heavy KOSDAQ market as it marks its 30th anniversary.
Jeong Eun-bo, chairman of the KRX, made the remarks at a press conference with foreign media in Seoul on June 22, responding to concerns over market volatility. His comments came as the combined market capitalization of Samsung Electronics Co. and SK hynix Inc. surpassed 50 percent of the total value of companies listed on the benchmark Korea Composite Stock Price Index (KOSPI).
Coverage comparison
Reporting by Yonhap News Agency covered two separate appearances by Jeong. In late June, he addressed the semiconductor concentration and the government's efforts to smooth market movements, as well as the easing of the so-called "Korea discount." In a separate speech marking the KOSDAQ's 30th anniversary on July 1, he detailed plans to restructure the market to enhance fairness and transparency.
Key claims
Market concentration is natural
Jeong said the concentration in the semiconductor sector is a result of a "natural price-setting process driven by supply and demand," taking into account factors such as the operating profits of Samsung and SK hynix. He added that it is too early to say if the current semiconductor rally is "speculation."
According to Yonhap, the combined market cap of the two chipmakers exceeds half of the KOSPI's total value. Jeong noted that the price-to-earnings ratio (PER) based on the expected revenue of Samsung and SK hynix is set to be "a bit shy of 7 to 8," while the figure for U.S.-based Micron Technology Inc. is over 10.
The government is making efforts to "smooth out" such market movements, Jeong said, without elaborating on specific measures.
'Korea discount' easing
Jeong assessed that the so-called "Korea discount" — the tendency for South Korean stocks to trade at a discount relative to global peers — is being "significantly" eased. He attributed this to improving global competitiveness of the country's key industries and efforts to enhance investor trust, including the government-led corporate "value-up program."
Under the initiative, the KRX has been working to swiftly delist insolvent companies, prevent dual listings, and root out unfair trading practices. Jeong also said efforts to attract overseas liquidity are under way.
KOSDAQ revamp plans
Speaking at a ceremony for the KOSDAQ's 30th anniversary, Jeong said the KRX will implement a set of measures to restructure the market to boost fairness and transparency. "We need to take drastic measures to help the KOSDAQ market take a leap forward," he said.
According to Yonhap, the KRX will tighten review for delisting of troubled firms, expediting their exit from the market, and also tighten the criteria for complete capital impairment and noncompliance with disclosure obligations. The KRX expects some 90 companies to be on the exit list this year, sharply up from last year's 38.
The KRX and the regulator are also reviewing a plan to divide the KOSDAQ market into two tiers — a premium market for heavyweights and a standard market for promising players — and to develop a new stock index for the premium market.
The total market cap of firms on the KOSDAQ market topped 600 trillion won (US$385 billion) for the first time earlier this year, after starting at around 7 trillion won in 1996. The number of KOSDAQ-listed companies rose to 1,827 last year from 341 in 1996, Yonhap reported. Listed firms have raised a combined 43.2 trillion won via initial public offerings since the market's launch, while their stock offerings totaled 45.9 trillion won.