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Monday, 3 February 2014

KorEconomics 101 (한국경제학개론), Part I: Korea Exchange - Principal Stock Exchange in Korea and Kor-economics for Dummies

Korea Exchange Busan Main Office: Nurwon Building.,134 Jaseong Avenue/Jaseongno, Beomil 2-dong 825-3 beonji, 601-720 Busan Dong-gu 

Korea Exchange (Hanja/Abbreviation/Romanization: 韓國去來所/KRX/Hankook Georaeso) is the sole securities exchange operator in South Korea. It is headquartered in Beomil 2-dong, Busan Dong-gu, and has an office for cash markets and market oversight in Yeouido-dong, Seoul Yeongdeungpo-gu. All business and equities transactions in KRX are using South Korean Won. The current CEO of this Stock Exchange is Choi Kyeong-soo/최경수 (2013~2016).

The Korea Exchange was created through the integration of Korea Stock Exchange, Korea Futures Exchange and KOSDAQ Stock Market under the Korea Stock & Futures Exchange Act. The securities and derivatives markets of former exchanges are now business divisions of Korea Exchange: the Stock Market Division, KOSDAQ Market Division and Derivatives Market Division. As of October 2012, Korea Exchange had 1,796 listed companies with a combined market capitalization of $1.1 trillion. 

The exchange has normal trading sessions from 09:00 am to 03:15 pm (in Korean Standard Time: +9) on all days of the week except Saturdays, Sundays and holidays declared by the Exchange (i.e: Seollal [Lunar New Year], Samil Day [March 1st], Children's Day, Vesak Day, Memorial Day, Chuseok [Korean Thanksgiving], Gwangbokjeol [Korean Liberation Day], Gaecheonjeol [National Foundation Day], Hangul Day and Christmas + New Year's Day) in advance.

To trade futures and options contracts listed on KRX, a foreign investor may designate custodian banks as standing proxies (through custodian bank agreements and standing proxy agreements to facilitate trading).

A custodian bank (e.g: Korea Exchange Bank [KEB/외환은행/Oehwan Eunhaeng]) as a standing proxy opens accounts at foreign exchange banks and futures companies, deposits, and withdrawals investors' money and monitors investors' properties for them. A foreign investor should designate foreign exchange banks through a foreign currency exchange agreement to execute his foreign exchange transactions and transfers. Most foreign exchange banks also do custodian bank and standing proxy operations. A foreign investor should designate securities and futures companies to trade futures and options traded on KRX.

Korea Exchange Seoul-Yeouido Annex: 76 Yeouinaru Avenue/Yeouinaru-ro, Yeouido-dong 33-beonji, 150-977 Seoul Yeongdeungpo-gu

List of Stock Indices in KRX. Essential for newbie investors:
1. KOSPI - The Korea Composite Stock Price Index (코스피지수) is the index of all common stocks traded on the Stock Market Division—previously, Korea Stock Exchange—of the Korea Exchange. It is the representative stock market index of South Korea, like the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 (S&P500) in the United States. KOSPI was introduced in 1983 with the base value of 100 as of January 4, 1980. It is calculated based on market capitalization. As of 2007, KOSPI's daily volume is hundreds of millions of shares or (trillions of won). Top 10 stocks by market capitalization are:
  • Samsung Electronics/삼성전자 (005930; Electrical Appliances and Gadgets)
  • Hyundai Motors/현대자동차 (005380; Automotive)
  • POSCO/포스코 (005490; Steel and Iron Products)
  • Kia Motors/기아자동차 (000270; Automotive)
  • Hyundai Mobis/현대모비스 (012330; Automotive Parts and Precision)
  • LG Chem/LG화학 (051910; Chemicals)
  • Samsung Life Insurance/삼성생명 (032830; Insurance)
  • Hyundai Heavy Industries/현대중공업 (009540; Shipbuilding)
  • Shinhan Financial Group/신한금융그룹 (055550; Financial Banks)
  • Korea Electric Power/한국전력공사 (015760; Electric Utilities)

2. KOSDAQ - The Korean Securities Dealers Automated Quotations (코스닥) is a trading board of Korea Exchange (KRX) in South Korea established in 1996. Initially set up by Korea Financial Investment Association as an independent stock market from the Korean Stock Exchange, it was benchmarked from the American counterpart, NASDAQ. KOSDAQ is an electronic stock market, just like NASDAQ. The open hours for the market is 09:00AM to 03:00PM KST. It is now operated as SME Market Division of KRX. As per 19 February 2008, 1029 companies are listed on KOSDAQ for trading.

3. KOSPI 200The KOSPI 200 index consists of 200 big companies of the Stock Market Division. The base value of 100 was set on January 3, 1990. It has over 70% market value of the KOSPI, and so moves along with the KOSPI index. KOSPI 200 is important because it is listed on futures and option markets and is one of the most actively traded indeces in the world. The KOSPI is calculated as current market capitalization (at the time of comparison) divided by base market capitalization (as of January 4, 1980). Its all-time low is 31.96, reached on June 16, 1998, during the financial crisis. It closed above 200 for the first time on April 24, 2007.

4. KRX 100 - Index of 100 companies listed on Korea Exchange, including KOSDAQ's big companies. It's meant to replace KOSPI 200 as the key futures index, but has not been very successful to date.