Why does Korea`s stock market lag behind in NE Asia?

The market capitalization of Korean gaming giant Nexon as estimated by the Japanese stock market comes to 8.7 trillion (7.6 billion U.S. dollars) to 10.2 trillion won (8.9 billion dollars), the biggest IPO in Japan this year.

Experts predict that a second and third promising Korean company can debut on the Japanese market, but critics say the Korean stock market lags behind those of Japan and China in the race to go global.

○ Chinese stock grabs world attention

The Chinese stock market is stepping up its campaign to globalize. The Shanghai Exchange has completed basic prep work to launch an international stock market exclusively for foreign companies. The Chinese government wants to use the new stock market to list world-class foreign companies, including the world`s top 500.

Global companies are also sending positive signals in that they can take a step closer to consumers in China. China has transformed from the world`s factory into a major global market, and foreign companies want to directly mobilize the yuan currency required for business expansion there.

The Hong Kong stock market Hang Seng has listed French cosmetics brand L`Occitane and the Italian luxury brand Prada, which target similar benefits.

China and Hong Kong also swept last year’s global IPO market as well. Hong Kong accounted for 61.2 billion dollars, or 24 percent of the 300 billion dollars raised through IPOs worldwide. The Shenzhen stock exchange came next with 40 billion dollars (15.7 percent).

Experts say that once China`s foreign stock market is launched in Shanghai, it will pose a major threat to the Korea Exchange over the long term.

○ Japanese stock market drawing attention anew through Nexon

The Japanese stock market, which has kept low profile amid a slump, is also drawing attention from investors by attracting Nexon. The Korean company reportedly chose the Tokyo Nikkei to get listed in the judgment that it will be more advantageous for mergers and acquisitions overseas.

A Nexon source said, “We are earning about 70 percent of our sales overseas,” adding, “Since we`re not a company supplying services for domestic consumption, we will need to proactively seek M&As of foreign companies to become a world-class game company.”

This means that Nexon seeks to advance in the Japanese stock market since it targets Japanese game developers.

Daewoo Securities CEO Lim Ki-young said, “Unlike the Korean stock market, where investors largely consider game software developers as non-mainstream, Japan gives very high value to game companies," adding, "For this reason, Nexon apparently picked the Japanese stock market despite the complicated listing process."

Several other software developers are also said to be considering following Nexon`s lead.

yunjung@donga.com