Analysts Expect Wave of Blue Chip IPOs

Blue chip companies at home and abroad are expected to make their initial public offerings (IPO) one after another later this year.

The Korea Exchange (KRX) decided to aggressively push ahead with its listing of blue chip public corporations, including a few Chinese companies, and blue chip affiliates of the top 10 conglomerates.

The Korea Exchange began supplying blue chips as the stock market became revitalized with money flowing into funds. As companies can set a high price for their IPOs in this uptrend market, they are positively considering the IPO.

There is controversy over whether the supply of stocks will contribute to the growth of the stock market, but investors are expected to have more options.

Lotte Shopping recently said that it was preparing to list its stock on the market in the first half of next year.

When Will Foreign Companies List Their Stocks?-

Lee Young-tak, the chairman of KRX, said in a press conference on October 4 in the Korea Exchange building in Yeouido, Seoul, “Several Chinese companies will offer their IPOs in Korea later this year or early next year at the latest.”

That means that those companies are at the stage of setting prices for their IPOs through their lead managers in Korea.

Lee said, “We are pushing forward the listing of three or four Chinese companies at the same time on the Korean stock market,” adding, “We are now ironing out prices of the IPOs.”

KRX is considering the introduction of a “primary listing” system that allows foreign companies that are not listed in other countries to launch an IPO in the Korean stock market.

Who Are the Affiliates of the Top 10 Groups to Be Listed?-

Lotte Shopping, which manages Lotte Department and Lotte Mart, is the leader among domestic companies that are pushing ahead with their listings. Lotte Shopping is planning to invest the funds to be raised through the IPO in expanding malls of Lotte Mart.

Lee Sang-gu, an analyst of Hyundai Securities, predicted, “If Lotte Shopping, a major domestic company, is listed, its stock price will be in similar to that of Shinsegae.”

The Korea Exchange is also engaged in the listing of 10 Lotte Group affiliates, including Hotel Lotte and Lotte Construction, apart from Lotte Shopping.

Among other IPOs underway are 12 Samsung subsidiaries, including Samsung SDS, Samsung Corning; eight LG affiliates, including LG CNS and LG Innotek; 10 SK affiliates, including DOPCO and SK Communications; seven affiliates of Hyundai Motor Company, including DYMOS and KEFICO; Hanjin affiliates, including Keo Yang Shipping, Korea Engineering Consultants Corporation and TOPAS; Kumho affiliates, including Kumho Mitsui Chemicals and Kumho Polychem, and Hanhwa-affiliate Hanhwa Construction.

Blue Chip Public Corporations and Life Insurance Companies-

KRX said that six blue chip public corporation are qualified for listing, which include Korea National Housing Corporation, Korea Land Corporation, Korea Highway Corporation, Korea Water Resource Corporation, Korea National Oil Corporation and Korea District Heating Corporation.

Ok Chi-jang, head of Stock Market Division, said, “Korea Electric Power Corporation, KT, POSCO and KT&G which are listed after being privatized are blue chips that represent the Korean stock market,” adding, “We are planning to list qualified public corporations, even if those corporations are not yet privatized.”

It is expected that listing life insurance companies will be discussed.

As the government announced to sell its stakes in Korea Life Insurance through a listing, it seems that the issue of distributing profits from listing to policyholders will be resolved. Korea Deposit Insurance Corporation owns 49 percent stake in Korea Life Insurance.

Kyobo Life Insurance announced in its investor relations meeting for institutional investors on September 29, “We have an intention to list our company, if we are allowed to contribute the profits to be distributed to policyholders to public utility foundations.”

Park Seok-hyun, analyst of Meritz Securities, said, “Unlike their U.S. counterparts, which started out as a mutual company, Korean life insurance companies are founded as a stock company. In this regard, it seems better to donate the profit to public utility foundations, rather than distribute it to policyholders,” adding, “That would lead to listings of many life insurance firms.”

Im-Sook Ha Wan-Bae Lee artemes@donga.com roryrery@donga.com