South Korea's government plans to allow overseas companies to hold initial public offerings in the country from tomorrow to bolster Asia's fourth-largest stock market.
Overseas companies which haven't listed on overseas exchanges will be subject to the same scrutiny of profitability and ownership structure as local companies seeking to sell shares in the country, the Financial Supervisory Service regulatory body said in a statement released today. Currently, only previously listed overseas companies are allowed to seek a secondary listing in South Korea; none have done so.
South Korea's financial regulators are trying to entice creditworthy companies to sell shares to help the development of the country's capital market. South Korean stocks gained 64 percent this year, based on US dollar value, becoming the second-best performer among 15 Asian exchanges tracked by Bloomberg Analytics.
"The move is part of the regulator's efforts to sustain growth in the country's stock market," said Bong Won Gil, an analyst at Daishin Securities Co in Seoul.
"Some overseas companies are tapping the possibility of listing on the stock market, which is booming, so the move will be positive," he said.
After listing, overseas companies will be able to use accounting principles generally accepted in the US or under global standards when they submit financial statements to the Korea Exchange, the statement said. They will be restricted from changing those accounting principles at their discretion after the listing.
South Korea will ask overseas companies to make disclosures in the Korean language and submit Korean-language extracts of their internal documents reported to headquarters, which will help local investors assess the value of their stock, the regulator said.
To list shares in Korea, companies should have 20 billion won (US$19.7 million) of annual average sales over the past three years and a minimum of 10 billion won of shareholders' capital. They should have more than 30 percent of their outstanding shares owned by more than 1,000 retail investors to trade on the main exchange.
South Korea will abolish a cap on a biggest shareholder's ownership, which is set at 70 percent of a company's outstanding shares, in case of listing of overseas companies, the statement said.
South Korea also plans to simplify and reduce the number of disclosure requirements for listed companies starting April 1, the regulator said in another statement today. The move will cut the number of disclose requirements from 71 from 200 now, it said.
So far, no overseas companies have been listed on the Korea Exchange. China's Powerleader Science & Technology Co (寶德科技), which is already listed on Hong Kong's GEM board for smaller companies, plans to sell its shares to Korean investors, arranged by Hyundai Securities Co, according to the Korean brokerage on Dec. 22.
Shanghai 3F New Materials Co (上海三愛富新材料) plans to list its shares in South Korea, arranged by Samsung Securities Co, the Korea Economic Daily said on Dec. 21, citing an official familiar with the plan.
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