[Exclusive] Kickstarting a 'KOSDAQ boom'…Increasing tax benefits further

Government to announce KOSDAQ activation measures next month

Strengthening personal income tax deductions; lowering transaction taxes for pension funds to誘ke investment

Lowering listing thresholds for innovative firms…Delisting those with market caps under 15 billion won

The government will roll out a comprehensive plan to revitalize the KOSDAQ market, including strengthening tax benefits for individual investors and pension funds. It also plans to revise entry and exit requirements for the KOSDAQ market so innovative firms can grow freely. The measures aim to revive the sluggish KOSDAQ market compared with the main board (KOSPI), which recently passed the 4,000 mark for the first time.

According to financial authorities and the securities industry on the 27th, the Financial Services Commission is expected to announce KOSDAQ market activation measures as early as the beginning of next month. The KOSDAQ market, created with the dream of becoming a "U.S. style NASDAQ," has been shunned by investors due to a lack of innovative listed companies, uncertainties caused by market manipulators, and lower returns compared with the KOSPI market.

Financial authorities view attracting funds from individual investors and large investors such as pension funds to the KOSDAQ market as the top priority. To that end, they plan to significantly expand the income tax deduction for KOSDAQ Venture Fund products, which channel a substantial portion of investment into innovative and venture companies. Currently, investors receive an income tax deduction equal to 10% of their investment up to a maximum of 30 million won; discussions are underway between ministries to raise the deduction cap to 50 million won.

Measures are also being considered to raise the KOSDAQ investment proportion of pension funds, which currently stands at only around 3%. The core idea is to offer incentives such as exemptions from securities transaction tax to pension funds and foreign institutional investors. Using the 150 trillion won National Growth Fund to stimulate the KOSDAQ market is also under consideration.

The government will also lower special listing thresholds to attract promising firms to the KOSDAQ market and introduce measures to strengthen exit rules for unsound companies. Next year, stocks with a market capitalization below 15 billion won are expected to be subject to delisting. A financial authority official said, "Both individual and pension fund investment must become active for the KOSDAQ market to emerge from its slump."

This time, boosting the KOSDAQ…Tax incentives for individuals, pension funds step in, venture capital投入

With "Sachunp'i" settled, starting 'Cheon-Sdak'…Comprehensive measures next month

49.78% vs 20.96%. These are the recent six-month return rates for the KOSPI market and the KOSDAQ market, respectively. After pledging a "KOSPI 5,000 era," the government appears to have largely neglected the KOSDAQ market, which investors have also overlooked. This is why the government has decided to issue activation measures for the first time in seven years.

Making the KOSDAQ a stage for innovative firms

Approaching its 30th anniversary next year, the KOSDAQ has repeatedly been criticized for becoming a playground for short-term traders. Leading firms have migrated to the KOSPI, and numerous weak listed companies influenced by market manipulators have appeared. The KOSDAQ Association said in September, in its "Tasks to Enhance the Competitiveness of KOSDAQ Companies," that "the KOSDAQ market has been transformed into a short-term trading market."

Financial authorities plan to unveil a comprehensive plan to grow the KOSDAQ into a "Cheon-Sdak" (index 1,000). To foster leading firms, they will first lower the special listing thresholds for innovative companies. The industry has voiced complaints that, after some technology-special listing companies performed poorly post-listing and lost investor trust, evaluation standards were tightened further in response to market demands. In fact, the number of companies listed via the technology-special route this year was 35, down from 42 last year.

Tax incentives to attract investors will also be significantly strengthened. Authorities are pushing to expand the income tax deduction for KOSDAQ Venture Funds, set up for innovative and venture firms. They plan to raise the deduction cap from the current maximum investment of 30 million won to 50 million won. In that case, the income tax deduction would increase from 3 million won (10% of the investment) to 5 million won.

From next year, the priority allocation rate of KOSDAQ public offerings to KOSDAQ Venture Funds will be raised from the current 25% to 30% or more. Increased mandatory allocation is expected to improve the profitability of KOSDAQ Venture Funds and make it easier for listed companies to raise funds.

Will pension funds become the savior?

One major task is to raise the proportion of pension funds invested in the KOSDAQ, which is currently concentrated on the KOSPI. The government is considering measures to induce pension funds' KOSDAQ allocations from the current low-3% level to around 5%.

Inside and outside financial authorities, proposals to use the 150 trillion won National Growth Fund to activate the KOSDAQ are also being discussed. The idea is to have the National Growth Fund serve as seed capital for KOSDAQ-listed companies in advanced industries that it selects as investment targets. The government plans to concentrate investment over the next five years on 10 advanced strategic industries such as artificial intelligence (AI), semiconductors, and biotech. Observers expect a substantial portion of the fund will flow into small and medium technology companies.

Ultimately, the goal is to restructure the stock market to match the characteristics of firms at each growth stage. There have long been criticisms that the KOSPI, KOSDAQ, and KONEX lack distinctive roles. A senior financial authority official said, "We will pursue a policy that transforms KONEX into a market for ventures and small companies, the KOSDAQ into a market for growth and mid-sized companies, and the main board into a market centered on high-quality large firms."

Securities firms to concentrate venture capital

Securities firms also plan to inject large amounts of capital into small, mid-sized, and venture companies, many of which are KOSDAQ-listed, starting next year. This follows major firms receiving approvals as comprehensive financial investment business operators. The additional capital injected as venture capital is estimated to exceed 20 trillion won.

Korea Investment & Securities and Mirae Asset Securities were designated as Integrated Managed Account (IMA) operators on the 19th. Kiwoom Securities was approved as an additional issuer of short-term notes alongside existing issuers Korea Investment & Securities, Mirae Asset, KB, and NH Investment & Securities. IMA operators can raise funds at low cost up to 300% of their equity capital, and note issuers up to 200%. For example, Korea Investment & Securities, with equity capital of 12 trillion won, could raise up to 36 trillion won to supply to the market.

If IMA and short-term note issuers attract funds, they must invest at least 10% of the raised amount into venture capital. This ratio will rise to 20% in 2027 and 25% in 2028.

Park Jae-won/Seo Hyung-kyo/Park Ju-yeon/Ryu Eun-hyuk reporters wonderful@hankyung.com