South Korea’s stock market will see another booming year with a record-high volume of initial public offerings in 2016, but a bearish market sentiment could hamper expectations, analysts said.

Korea Exchange and Eugene Investment & Securities expect this year to rank as the best for IPOs with over 130 companies going public on the main bourse KOSPI and the secondary tech-heavy KOSDAQ to raise a combined 11 trillion won ($9 billion), beating the record high of 10.9 trillion won in 2010.

Despite recent market volatility sparked by China’s economic slowdown, six companies went public in the first two months this year, led by midsize deals including industrial coating firm Hansol CNP and fashion bag maker JS Corp. 



“Given that January and February are regarded as off-season for IPO deals, the number of firms that went public have already surpassed last year’s level during this period. More firms which have got IPO approvals are preparing a float which also outnumbers the 2015 figure,” Park Jong-sun, an analyst at Eugene Investment & Securities said. Last year, there were 118 new listings worth 4.5 trillion won, according to Financial Supervisory Service. 

Most prominent in the IPO pipeline is Hotel Lotte which is expected to raise between 3 to 4 trillion won by getting listed although the firm is reportedly considering cutting its estimated market value and IPO price due to a bearish stock market and uncertainties in the duty-free business.

Less restrictive listing rules designed to woo companies with strong growth prospects in line with President Park Geun-hye’s “creative economy” -- a drive to foster start-ups and ease the country’s economic reliance on a small number of large business groups -- will continue to provide a supportive environment for robust IPO activities, analysts said.

Companies that scrapped their IPO plans in 2015 including Lotte Data Communication, KIS Information & Communication, Tae Jin International and Seoul Viosys are set to go public this year.

Other notable deals in the pipeline include Netmarble, Korea Seven, Yongpyong Resort, Daelim C&S, Haitai Confectionery & Foods, Tbroad and Nature Republic.

Analysts also expect that foreign companies will seek to get listed in Korea as Korea Exchange is actively courting them. 

“China Crystal New Material Holdings was the first foreign firm to debut in the Korean stock market this year, and more foreign firms are expected to make inroads,” Park said.

The Chinese synthetic mica manufacturer based in the Cayman Islands, floated on the KOSDAQ with its initial price set at 3,000 won per share in February. It was the first time in two years that a foreign company went public in Korea.

“Buoyed by blockbuster deals such as Hotel Lotte and the resumption of public issues by non-Korean companies, the IPO market will be strong while drumming up investors’ interest,” an official at FSS said.

However, some analysts pointed out that the IPO market may cool down if the stock market becomes bearish as investors will take a wait-and-see approach before subscribing to IPOs and follow-on offerings.

A bearish market is defined as a decline of 20 percent or more. The KOSPI fell 13.4 percent as of Tuesday from its high in 2015, meaning that the market is close to reaching that threshold.

“There’s a growing possibility that the global stock market will be bearish this year. The global stocks have capped a 20 percent slide from 2015 peak and they have completed a pattern of lower highs and lows which point to a bearish trend,” Kim Young-il, an analyst at Daishin Securities said.

By Park Han-na (hnpark@heraldcorp.com)