The South Korean government is signaling a major overhaul of the KOSDAQ market, with a detailed blueprint expected to be unveiled soon.
The timing is critical. While the KOSPI has been on a tear, breaking the 5,000 and even 6,000-point marks driven by a semiconductor supercycle, the KOSDAQ has been left behind. Year-to-date returns show a stark contrast: the KOSPI 200 index is up over 39%, while the KOSDAQ 150 has gained a more modest 26%. This growing disparity has shifted the government's focus toward revitalizing the market for smaller, innovative companies.
A sudden, sharp plunge in the KOSDAQ on March 4th, where the index fell over 14% in a single day, served as a wake-up call. It exposed the fragility of the small-cap market and rattled investor confidence, creating an urgent need for policy intervention to restore stability and trust.
However, this reform isn't a reaction to a single event. It's the culmination of a deliberate, multi-stage process that began over a year ago.
First, regulators at the Financial Services Commission (FSC) and Korea Exchange (KRX) have been laying the groundwork since early 2025 to clean up the market. They have systematically tightened listing and delisting requirements to weed out so-called 'zombie companies'—chronically underperforming firms that drain market resources. This included creating dedicated teams to manage the delisting process and blocking loopholes that companies used to avoid being delisted.
Second, this cleanup has been paired with efforts to improve transparency and governance. New guidelines for English-language disclosures and corporate value-up programs are designed to make KOSDAQ companies more attractive to foreign and institutional investors.
Finally, the Bank of Korea's decision to hold interest rates steady has provided a stable macroeconomic backdrop. This gives the government the 'policy space' to implement these reforms without concerns that tightening financial conditions could disrupt the market.
The upcoming meeting is pivotal because it marks a shift from planning to execution. By inviting research-level experts rather than just CEOs, the government is signaling its intent to focus on a concrete, workable plan. The agenda will likely detail the roadmap for delisting firms while simultaneously fostering a healthier ecosystem for venture capital to fund the next generation of tech leaders.
- KOSDAQ: Korea's technology-focused stock market, similar to the NASDAQ in the United States. It primarily lists small and medium-sized enterprises and venture companies.
- Zombie Companies: Firms that are unable to cover their debt servicing costs from profits over an extended period. They are often kept alive by continued credit but are a drag on economic productivity.
- Venture Capital: A form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential.