KOSDAQ stocks fell 28.02% in one month, with the index dropping from 920.57 on June 29 to 662.68 on July 29, according to financial investment industry data released on July 29. The sharp decline coincided with the Korea Exchange's implementation of stricter listing maintenance requirements this month, raising market capitalization thresholds from 150 billion won to 200 billion won, with a further increase to 300 billion won scheduled for January. Korea Exchange introduced the strengthened delisting criteria to accelerate the removal of underperforming companies from the KOSDAQ market amid an unprecedented liquidity crisis affecting small and mid-cap stocks.
KOSDAQ Index Records 257.89-Point Decline in One Month
The KOSDAQ index fell 257.89 points from 920.57 on June 29 to 662.68 on July 29, according to financial investment industry data. Trading volume decreased alongside the price decline, significantly reducing liquidity for small and mid-cap stocks.
Korea Exchange Raises Market Cap Threshold to 200 Billion Won
Korea Exchange strengthened KOSDAQ listing maintenance requirements this month. The market capitalization threshold increased from 150 billion won to 200 billion won, with a scheduled increase to 300 billion won in January. Companies falling below the threshold for 30 consecutive trading days are designated as management issues, and those failing to recover the threshold for 45 out of 90 trading days face delisting procedures.
Korea Exchange introduced new delisting requirements for penny stocks trading below 1,000 won. The complete capital erosion standard expanded from fiscal year-end to semi-annual basis. The cumulative penalty point threshold for disclosure violations in the past year decreased from 15 points to 10 points.
240 Companies Enter Delisting Risk Zone
KB Securities reported on July 10 that 143 companies had market capitalizations below 200 billion won and 146 companies had share prices below 1,000 won. Excluding overlaps, approximately 240 companies entered the delisting risk zone, representing about 14% of all KOSDAQ-listed companies.
Financial investment industry sources noted that the number of companies in the risk zone likely increased substantially after the index fell from 830 to 650 following the KB Securities analysis. A securities industry official stated that in markets with dried-up liquidity, stock price declines directly translate to market cap reductions, causing companies to fail listing maintenance standards faster than expected.
Financial authorities estimated in February that approximately 150 companies would face delisting in 2025 under the reformed standards. This represents a significant increase from 8 cases in 2023, 20 cases in 2024, and an estimated 38 cases in 2024.
Lim Jung-eun, a KB Securities researcher, stated that the strengthened delisting standards are expected to accelerate the exit of low-priced stocks, small-cap stocks, and companies with persistent losses. Lim added that companies closer to delisting requirements may experience faster capital outflows, necessitating continuous monitoring of market capitalization and stock price trends.
US and Japan Provide Improvement Periods for At-Risk Companies
According to the Capital Market Research Institute, the United States and Japan grant improvement periods to companies failing to meet listing maintenance standards and evaluate continued listing eligibility through improvement plan submissions and qualitative reviews. The New York Stock Exchange and NASDAQ operate case-specific improvement periods and review procedures, while the Tokyo Stock Exchange comprehensively evaluates marketability and financial soundness.
South Korea strengthened quantitative standards including market capitalization, penny stocks, complete capital erosion, and disclosure violations to increase the likelihood of swift delisting for companies failing to meet standards.
Jung Ji-soo, a senior researcher at the Capital Market Research Institute, stated that while the US and Japan comprehensively determine continued listing through improvement procedures and reviews, Korea's approach is characterized by clear quantitative standards and recovery procedures that accelerate delisting speed. Jung suggested the need for continuous supplementation of review procedure consistency, disclosure information adequacy, and investor protection measures alongside quantitative standard strengthening. Jung added that while strengthened delisting standards can contribute to long-term capital market trust recovery, authorities must also prepare for potential illegal activities by companies at risk of delisting.
FAQ
What caused the KOSDAQ index to fall 28% in one month?
The KOSDAQ index dropped from 920.57 on June 29 to 662.68 on July 29, a decline of 257.89 points or 28.02%. The decline occurred during an unprecedented liquidity crisis and coincided with Korea Exchange's implementation of stricter listing maintenance requirements this month.
How many KOSDAQ companies face delisting risk under the new standards?
KB Securities reported on July 10 that approximately 240 companies entered the delisting risk zone, representing about 14% of all KOSDAQ-listed companies. This included 143 companies with market capitalizations below 200 billion won and 146 companies with share prices below 1,000 won. Financial authorities estimated in February that approximately 150 companies would face delisting in 2025 under the reformed standards.
