High hopes, low trading volume for new Konex

Five days after the launch of Korea’s third stock exchange aimed at nurturing venture companies, the focus is on how effective the new market will be in helping them to raise capital.

On Monday, the Financial Services Commission and the Korea Exchange opened the Korea New Exchange (Konex), a market exclusively for start-ups that have the potential to grow in business but are not big enough to be listed on the Kospi or tech-heavy Kosdaq markets.

Upon launching the bourse, the FSC said that once the new market settles down and stocks are exchanged actively, small and midsize enterprises and venture companies will have a new channel to secure capital and investors will have an option to support entrepreneurs.

It also said that from a macro standpoint, the Konex market will serve as a foundation for boosting the so-called creative economy.

“The Konex market should aim to be like the United Kingdom’s Alternative Investment Market (AIM),” said FSC Chairman Shin Je-yoon.

AIM opened in 1995 to help start-ups raise capital and, as of April, there are 1,088 listed companies. Other bourses for venture companies include the Toronto Stock Exchange-Venture established in 1999, which lists 2,230 companies.

As for Konex, 21 companies from various industries, including biotechnology and semiconductors, selected by the government have been listed. So far, however, the amount of shares traded has been disappointing. According to Korea Exchange, on Wednesday a total of 61,000 shares were traded worth 254.3 million won. On Monday, a total of 219,600 shares were traded.

“We’re not surprised, because we had predicted [a small trading volume in the beginning],” said a Korea Exchange official. “The reason why trading isn’t as active as other markets is because retail investors’ participation in this market is limited and institutional investors invest for the long term.”

The official said that what’s more important than the number of shares traded is to provide start-up companies a place where they can set down roots and prosper.

Analysts, meanwhile, note that because start-ups are risky, investors are more prudent about pouring in money. The Korea Exchange official said listed companies are holding investors’ relations conferences with securities firms to raise awareness of their businesses.

The Korea Exchange said an index for the Konex market will be announced after six months of operation.

BY LEE EUN-JOO [angie@joongang.co.kr]