[FOUNTAIN]Nursing the Kosdaq to health

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[FOUNTAIN]Nursing the Kosdaq to health

"There is no hope left in the Kosdaq," an employee at NCsoft said as the computer game company prepared to move to the Korea Stock Exchange. The Kosdaq opened in July, 1996, at an index number of 100, and then shot up when the public responded to the government's plan to foster start-up businesses after the 1997 financial crisis. Trading volume on the Kosdaq on March 10, 2000, was heavier than that of the Korea Stock Exchange, and the index reached its high point of 283.84 that day. Share prices of some new high-tech businesses such as Serome Technology were roughly 10 times that of Samsung Electronics, Korea's flagship blue-chip stock.

But the shiny days did not last long. After political scandals dampened enthusiasm and a flood of new issues upset the supply-demand balance, prices started declining, and then the dot-com bubble burst both here and abroad. The long decline of the Kosdaq index beginning in late 2000 reached its nadir last week when the index hit a record low.

Looking back, the New York Stock Exchange, the symbol of American capitalism, went through a similar crisis two decades ago. The Dow Jones index broke through the 1000-point mark in January 1973. A combination of the Watergate scandal and rising prices and interest rates, however, soon sent the index spiraling down. By the time President Richard Nixon stepped down in 1974, the market index was barely half of what it had been a year before. At the time, a NYSE brokerage membership cost only about $65,000, only 2.5 times more than a New York taxi license.

In his book, "The Great Game: The Emergence of Wall Street as a World Power 1653-2000," John Steele Gordon described how the NYSE overcame this crisis. In 1975, it abolished fixed commissions, a feature of 180 years on the exchange. That shock to brokers, who would now have to compete on commission rates, was immense -- but it was necessary.

With such determination and with the addition of computerized investment practices, the NYSE was able to recover its place as the largest stock market in the world in the late 1980s. The Kosdaq is facing a time when it needs the kind of determination that the NYSE once showed. Merely waiting for U.S. stock market prices to rise will not do anything to stop registered companies and investors from abandoning ship.

The writer is the head of the Forbes Korea Team of the JoongAng Ilbo.

by Sohn Byoung-soo

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