Kosdaq buoyed by plan for fundInvestors scooped up shares on the junior bourse Kosdaq on Thursday, buoyed in part by expectations surrounding the launch of a new fund that follows emerging small and medium companies and Kosdaq-listed firms.
The release of the fund, dubbed the Kosdaq Venture Funds, is part of the financial authorities’ drive to bring in more long-term investors for smaller tech-driven companies - often dubbed “venture” companies in Korea.
To increase the appeal of the fund, the Financial Services Commission introduced exclusive benefits in January: a 10 percent tax break for investors putting in the maximum 30 million won ($28,000) and the preferential allocation of newly-listed shares.
Thirty percent of initial public offering (IPO) shares being traded on the Kosdaq will first go to the Kosdaq Venture Funds, a big advantage given that the returns on first-time shares are typically high.
Chairman Choi Jong-ku of the Financial Services Commission went to great lengths to promote the Kosdaq-oriented fund, even signing up for it himself.
“The fund will earmark more than half of its investments for SMEs,” he said at an Industrial Bank of Korea branch in Mapo District, western Seoul.
“[The fund will] allow the public to support the growth of innovative firms,” he said.
Analysts expect that the fund will reach 1 trillion won, mainly due to the tax breaks and access to new shares.
“Twenty-seven Kosdaq Venture Funds are made available on April 5 and most of the planned products will release in April,” said Kim Sang-ho, an analyst at Shinhan Investment.
“We estimate the total management size will range between 500 billion won and 1 trillion won,” Kim said.
The reserved shares of IPO stocks will particularly draw in institutional investors, said Shin Seung-jin, an analyst at Samsung Securities.
“Currently, institutional investors get access to 50 percent of Kosdaq’s newly-listed shares as preferential treatment,” Shin said, “But of the 50 percent, 30 percent will be reserved for Kosdaq Venture Funds, which will prompt institutional investors to join the fund.”
Still, there is a catch. To be eligible for a tax break, one must hold the investment for at least three years.
The condition is linked with the government’s intention to lure more long-term investors into the Kosdaq market since the tech and bio heavy market is vulnerable to fluctuations triggered by short sellers.
A total of 57 asset management firms are scheduled to introduce 64 Korea Venture Funds, according to Korea Financial Investment Association on Wednesday.
The asset managers set varying minimum investment ceilings in the form of either public offering or private equity funds. The asset managers include Samsung Active, Hana UBS, Hyundai Investment, Brain and Asset One and Timefolio.
The Kosdaq went up 0.74 percent to 868.93 on Thursday with retail and institutional investors on the buying side..
BY PARK EUN-JEE [firstname.lastname@example.org]
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