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KRX to weed out unqualified preferred shares

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(Globalpost/GlobalPost)

By Kang Yoon-seung

SEOUL, June 24 (Yonhap) -- The main bourse operator said Monday it plans to sort out unqualified preferred shares listed on the local stock markets starting in July in a bid to protect investors.

The Korea Exchange (KRX) said it plans to expel preferred stocks from the main bourse and the tech-laden KOSDAQ market when their trading volume and market capitalization fail to meet the minimum requirements.

Preferred stocks refer to shares with higher dividends than common shares and usually hold no voting rights. Such shares hold a priority in receiving assets in case of liquidation.

The KRX said 39 of the country's 148 preferred stocks are anticipated to be designated for a tougher surveillance, with 37 of them being listed on the main bourse.

A preferred stock is delisted from the local stock market when its market capitalization fails to hover above 500 million won (US$432,226) for 10 consecutive trading sessions in 90 days after the designation.

It is also delisted when the number of days in which the market cap hovers above 500 million won stays below 30 days.

The bourse operator added listed firms with preferred shares should take measures to beef up liquidity by issuing more shares or through a stock split. The KRX will apply an eased rule until June 2014.

The KRX added local investors should be cautious when making investments in preferred shares, as such stocks are vulnerable to sharp price fluctuations and lack of liquidity, which may result in losses.

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