The South Korean government is considering the introduction of an absolute evaluation method for the KOSDAQ promotion system. However, the Korea Exchange has stated that specific criteria for selecting high-quality companies and operational details have not yet been finalized.
On October 23, the exchange announced, "Details regarding the introduction of segments, including designated requirements and related systems, are currently under review and have not been determined."
Recent speculation suggests that during the implementation of the KOSDAQ promotion system, an absolute evaluation method may be adopted, allowing companies that meet certain criteria to be promoted without a predetermined limit on the number of companies included in the 'Select' category.
The KOSDAQ promotion system categorizes listed companies into three groups: 'Select' for high-quality firms, 'Standard' for general companies, and 'Management' for underperforming firms. The aim is to enhance investment incentives for high-quality companies and strengthen the competitiveness of the KOSDAQ market based on companies' growth potential and competitiveness.
A key issue is the criteria for inclusion in the Select category. Relative evaluation ranks companies and selects a limited number, while absolute evaluation allows companies to qualify based on meeting specific criteria such as market capitalization and financial soundness. If absolute evaluation is implemented, the number of high-quality companies could increase, potentially expanding the Select category.
Initially, there were discussions about limiting the number of companies in the Select category, but recent reports indicate that a model without a cap on the number of companies is being considered. Nonetheless, the exchange has clarified that no decisions have been made regarding the introduction of absolute evaluation or other operational details.
During the design process of the system, establishing criteria for selecting high-quality companies and the differentiation effect in the market are seen as major challenges. If the inclusion criteria are too strict, it could lead to a concentration of funds in certain stocks, while a relaxation of the criteria might diminish the distinctiveness of high-quality companies.
The KOSDAQ promotion system is modeled after the segment system of the U.S. Nasdaq, aiming to enhance investment incentives for institutional investors through market differentiation based on company characteristics. However, further discussions on specific requirements for companies and criteria for promotion and demotion are expected before the actual implementation of the system.
* This article has been translated by AI.
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