KRX will strengthen ESG mandate to lessen negative impact from corporate splits

KRX Chairman Sohn Byung-doo. [Photo by Han Joo-hyung]

Korea Exchange (KRX) will strengthen ESG mandate to lessen dilution and negative impact on shareholders through corporate carve-outs after separation and overcome the so-called Korea discount, according to the chief of Korea’s sole securities exchange operator.

“By toughening ESG reviews such as communication with shareholders and protections versus management changes, we could protect investors from negative impact from relisting of companies after split, “said KRX Chairman Sohn Byung-doo during a recent interview with Maeil Business Newspaper.

Sohn, upon starting his second year as the exchange operator’s chief, is seeking to introduce various measures to protect retail investors from unfair market practices and ease Korea discount, the tendency of local stocks being undervalued compared to firms’ actual performance.

Sohn nevertheless disagreed with an outright ban on co-listing of parent and new offspring.

“There has been no such case in the world, and such ban could only send companies to go public in other markets,” he said.

He is also against short selling ban. “KRX has been unable to find any proof to the argument that short selling results in fall in stock prices,” said Sohn, although he agreed on the needs to improve the local short selling market system, such as setting up a system for identifying illegal activities and making trade information more transparent.

While strengthening measures for protecting investors, KRX will pursue local securities markets’ stronger growth through expanded exchange traded fund (ETF) offerings.

Korea stands as No.3 in the global ETF market based on trade value, but total net assets in ETFs against stock market hover only at 2.8 percent, which is far below 12.9 percent of the United States and 17.8 percent of the United Kingdom, according to Sohn.

KRX will set up a team dedicated to evaluating ETF listing this year to make wider range of ETF products available at local stock markets.

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]