Only half of Korean stocks gain 1 year after being re-listed on Kospi

Only half of the stocks of South Korean companies that moved to the benchmark Kospi from secondary Kosdaq saw their prices increase in the mid to long term. The stocks had a spike after switching over to Kospi in many cases, but they eventually lost what they gained as corporate growth fell short of expectations.

According to the Korea Exchange on Sunday, seven out of 15 companies with a market cap of more than 500 billion won ($388.2 million) saw their stock prices rise a year after being listed on Kospi since 2008.

The other eight saw their stock prices decline during the period. The average return was negative 2.37 percent. Looking at the stock prices between the day of disclosing Kospi listing and the day of actual listing, eight companies saw their stock prices increase while seven took a fall.

Even by the current stock price, the price of eight companies has risen while those of seven have declined.

There was no consistency in the stock price when comparing those on the day of listing disclosure, the day of listing, and one year after the listing. This suggests that individual company issues such as earnings had a greater impact on stock prices than the market as a whole.

In general, Kospi relocation is expected to attract more funds from institutional investors such as pension funds and foreigners and gain greater recognition in terms of the corporate value.

“There is a widespread perception in the market that Kospi-listed companies are valued higher compared with others in the same industry,” said an official from a Kosdaq-listed company. “The previous listings of Celltrion Inc. and Kakao Corp. were mostly driven by shareholders’ demand.”

Yet, experts say that stock prices are most affected by earnings, which is the intrinsic value of a company.

For example, Asiana Airlines Inc., which moved to Kospi in March 2008, saw its share price halve in the year after the listing. The airline chose to list itself on the Kospi to overcome a high stock price discount compared with its peer Korean Air Lines Co. but things did not go as expected.

Asiana Airlines currently suffers from a high debt-to-equity ratio and the stock is trading at a price that is 62 percent lower than the listing price of 31,140 won.

Celltrion, which disclosed its plan to move to Kospi in August 2017, saw its share price surge 165 percent on the day of listing from the day of listing disclosure. However, its return over a year since the move has been lackluster at minus 23 percent.

“The top stocks on Kospi are already treated as large-cap stocks in terms of institutional and foreign demand,” said an analyst at a securities firm. “The belief that a listing switch is the key to stock price appreciation may be ungrounded.”

Meanwhile, there are some companies that were ignored at the time of their Kospi listing but are experiencing a performance rebound after earnings improvement, such as POSCO Future M Co., a secondary battery material company.

POSCO Future M announced its plans to list itself on Kospi instead of Kosdaq in February 2019 and moved to Kospi in May in the same year.

Its stock price has now jumped nearly 10 times as the growth potential of the secondary battery materials business has gained market attention.