ksd’s infrastructure for cross-listing of foreign companies ksd’s infrastructure for...
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KSD’s Infrastructure for Cross-Listing of Foreign CompaniesKSD’s Infrastructure for Cross-Listing of Foreign Companies
October 18, 2007October 18, 2007Bishkek, KyrgyzstanBishkek, Kyrgyzstan
Jae Woong (James) KimJae Woong (James) Kim
ContentsContents
1 KSD’s International Services
2
3 Korean Stock Market
KSD’s KDR Depositary Service for Foreign Co.
KDR DepositaryKDR DepositaryKDR DepositaryKDR Depositary
Custodian for ADR(GDR)Custodian for ADR(GDR)Underlying SharesUnderlying Shares
Custodian for ADR(GDR)Custodian for ADR(GDR)Underlying SharesUnderlying Shares
PrimaryPrimaryMarketMarket
PrimaryPrimaryMarketMarket
Domestic Domestic CompaniesCompaniesDomestic Domestic CompaniesCompanies
국내증권시장국내증권시장국내증권시장국내증권시장DomesticDomesticMarketMarket
DomesticDomesticMarketMarket
ForeignForeignCompaniesCompanies
ForeignForeignCompaniesCompanies
국내증권시장국내증권시장국내증권시장국내증권시장OverseasOverseasMarketMarket
OverseasOverseasMarketMarket
Domestic SecuritiesDomestic SecuritiesCustody & SettlementCustody & SettlementDomestic SecuritiesDomestic Securities
Custody & SettlementCustody & Settlement
Foreign SecuritiesForeign SecuritiesCustody & SettlementCustody & Settlement
Foreign SecuritiesForeign SecuritiesCustody & SettlementCustody & Settlement
SecondarySecondaryMarketMarket
SecondarySecondaryMarketMarket
DomesticDomesticInvestorsInvestorsDomesticDomesticInvestorsInvestors
ForeignForeignInvestorsInvestorsForeignForeign
InvestorsInvestors국내증권시장국내증권시장국내증권시장국내증권시장DomesticDomesticMarketMarket
DomesticDomesticMarketMarket
국내증권시장국내증권시장국내증권시장국내증권시장OverseasOverseasMarketMarket
OverseasOverseasMarketMarket
One Single Gateway for International Securities InvestmentOne Single Gateway for International Securities Investment
KSD’s International ServicesKSD’s International Services
11
KSD’s Foreign Securities Custody for Domestic InvestorsKSD’s Foreign Securities Custody for Domestic Investors
KSD’s International ServicesKSD’s International Services
USD USD BillionsBillions
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007.9
Global Custody Global Custody - General Investors : Mandatory- General Investors : Mandatory- Institutional Investors : Optional- Institutional Investors : Optional
Global Custody Global Custody - General Investors : Mandatory- General Investors : Mandatory- Institutional Investors : Optional- Institutional Investors : Optional
Cross-border ClearingCross-border ClearingNetwork (32 Markets)Network (32 Markets)
Cross-border ClearingCross-border ClearingNetwork (32 Markets)Network (32 Markets)
Communication Communication - SAFE21, SWIFT, - SAFE21, SWIFT, - Sub-Custodian’s Proprietary S/W- Sub-Custodian’s Proprietary S/W
Communication Communication - SAFE21, SWIFT, - SAFE21, SWIFT, - Sub-Custodian’s Proprietary S/W- Sub-Custodian’s Proprietary S/W
Custodian Custodian - Euroclear, Clearstream Bank- Euroclear, Clearstream Bank - Citibank, BNY, SSB, Pershing - Citibank, BNY, SSB, Pershing
Custodian Custodian - Euroclear, Clearstream Bank- Euroclear, Clearstream Bank - Citibank, BNY, SSB, Pershing - Citibank, BNY, SSB, Pershing
22
KSD’s Domestic Securities Custody for Foreign InvestorsKSD’s Domestic Securities Custody for Foreign Investors
KSD’s International ServicesKSD’s International Services
++
Total Asset under Custody (Sep. 30, 2007) Total Asset under Custody (Sep. 30, 2007) : Equity 122.5 Mil. Shares for 40 Clients: Equity 122.5 Mil. Shares for 40 Clients
Core ServicesCore Services Securities CustodySecurities Custody Cash Management Cash Management Linked Linked with FX Bankswith FX Banks
Added Value ServicesAdded Value Services Standing ProxyStanding Proxy Securities Lending & Securities Lending & Borrowing Borrowing Tri-party RepoTri-party Repo
CommunicationCommunication Web-based Local Custody Web-based Local Custody System / Fax / SWIFT / TelexSystem / Fax / SWIFT / Telex
Direct A/C Opening & Direct A/C Opening & Securities Custody by CSDSecurities Custody by CSD
Direct A/C Opening & Direct A/C Opening & Securities Custody by CSDSecurities Custody by CSD
Investment Registration to Investment Registration to Financial Supervisory Service (FSS)Financial Supervisory Service (FSS)
Investment Registration to Investment Registration to Financial Supervisory Service (FSS)Financial Supervisory Service (FSS)
Corporate Actions Corporate Actions (Voting Right, Dividend, Bonus Issues, etc.)(Voting Right, Dividend, Bonus Issues, etc.)
Corporate Actions Corporate Actions (Voting Right, Dividend, Bonus Issues, etc.)(Voting Right, Dividend, Bonus Issues, etc.)
CommunicationCommunication - SAFE21, SWIFT, Local Custody System- SAFE21, SWIFT, Local Custody System
CommunicationCommunication - SAFE21, SWIFT, Local Custody System- SAFE21, SWIFT, Local Custody System
Benefits of Custody to KSDBenefits of Custody to KSD
33
KSD’s International ServicesKSD’s International Services
For domestic companies For domestic companies that issue ADR or GDRthat issue ADR or GDR
Custody Agreement Custody Agreement – Bank of New YorkBank of New York
– Citibank N.A.Citibank N.A.
– Deutsche Bank Trust Deutsche Bank Trust CompanyCompany
– JP Morgan ChaseJP Morgan Chase
Korean Companies’ ADR Korean Companies’ ADR & GDR: 43 issues& GDR: 43 issues
Market Share of KSD in Market Share of KSD in Korea: 100%Korea: 100%
Total Custody Shares: 554 Total Custody Shares: 554 millionmillion
KSD’s Custody Services for Domestic Companies issuing ADR(GDR)KSD’s Custody Services for Domestic Companies issuing ADR(GDR)
44
Mil. Shares
Citibank,427
JPMC, 94 DBTC, 0.7
BNY, 32
KDR KDR Korean Depositary ReceiptKorean Depositary Receipt
KDR KDR Korean Depositary ReceiptKorean Depositary Receipt
KSD is the only depositary that can issue KDR in Korea KSD is the only depositary that can issue KDR in Korea pursuant to the Securities Exchange Act and its Enforcement Decreepursuant to the Securities Exchange Act and its Enforcement Decree
KSD is the only depositary that can issue KDR in Korea KSD is the only depositary that can issue KDR in Korea pursuant to the Securities Exchange Act and its Enforcement Decreepursuant to the Securities Exchange Act and its Enforcement Decree
CompaniesCompanies
3NOD3NOD
Huafeng TextileHuafeng Textile
Yonhap Tech.Yonhap Tech.
Cowell E HoldingsCowell E Holdings
French ETFFrench ETF
STX Pan OceanSTX Pan Ocean
Nepro ITNepro IT
EstablishmentEstablishment
CaymanCayman
CaymanCayman
Hong KongHong Kong
CaymanCayman
FranceFrance
KoreaKorea
JapanJapan
Issuing CountryIssuing Country
KoreaKorea
Hong KongHong Kong
KoreaKorea
KoreaKorea
FranceFrance
SingaporeSingapore
KoreaKorea
Foreign ListingForeign Listing
Non-ListingNon-Listing
Hong KongHong Kong
Non-ListingNon-Listing
Non-ListingNon-Listing
EuronextEuronext
SingaporeSingapore
Non-ListingNon-Listing
MigrationMigration
XX
OO
XX
XX
XX
OO
OO
Listing TypeListing Type
ShareShare
KDRKDR
ShareShare
ShareShare
ETFETF
ShareShare
KDRKDR
Listing ScheduleListing Schedule
8. 17. 20078. 17. 2007
NovemberNovember
DecemberDecember
DecemberDecember
DecemberDecember
DecemberDecember
20082008
Foreign Companies’ Listing to Korean MarketForeign Companies’ Listing to Korean Market
KDR is issued by KSD based on KDR is issued by KSD based on original shares issued by original shares issued by foreign companiesforeign companies
KSD’s International ServicesKSD’s International Services
KSD’s KDR Depositary service for Foreign CompaniesKSD’s KDR Depositary service for Foreign Companies
55
KDR IssuanceKDR Issuance
KDR KDR DistributionDistribution
KDR KDR DistributionDistribution
KoreaKoreaOverseasOverseas
Issuance of Original SharesIssuance of Original SharesIssuance of Original SharesIssuance of Original Shares
FSS
Lead Manager SubscriptionHandling Co.
Investors
Issuing Co.
Custodian KRX
Securities ReportSecurities ReportSecurities ReportSecurities Report
CustodyCustody
AgreementAgreement
CustodyCustody
AgreementAgreement
Deposit Deposit AgreementAgreement
Deposit Deposit AgreementAgreement
Listing Listing ApplicationApplication
Listing Listing ApplicationApplication
Underwriting AgreementUnderwriting AgreementUnderwriting AgreementUnderwriting Agreement
Notification ofNotification ofListingListing
Notification ofNotification ofListingListing
Issuance of Issuance of KDRKDR
Issuance of Issuance of KDRKDR
KDRKDRDepositaryDepositary(Primary Market)(Primary Market)
KDRKDRDepositaryDepositary(Primary Market)(Primary Market)
CSDCSD (Secondary (Secondary Market)Market)
CSDCSD (Secondary (Secondary Market)Market)
KSD
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
66
SellerSeller
OverseasOverseas Custodian
SettlementSettlement
KoreaKorea
KSD
TradingTrading
KRX
* * No Changes in No Changes in KSD a/cKSD a/c
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
KDR Trading & SettlementKDR Trading & Settlement
SellerSeller SellerSellerBuyerBuyer
Seller’sa/c
Seller’sa/c
Buyer’sa/c
Buyer’sa/c
KSD’s a/cKSD’s a/c
77
Share Conversion into KDR
Share Conversion into KDR KDR SellingKDR Selling
SharePriceSharePrice
KDR 가격KDR 가격KDRPriceKDRPrice
Share SellingShare Selling KDR Cancellation to Shares
KDR Cancellation to Shares
KDR 가격KDR 가격SharePriceSharePrice
KDRPriceKDRPrice
KDR Conversion & CancellationKDR Conversion & Cancellation
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
Arbitrage Arbitrage TradingTrading
KDR Conversion & Cancellation takes 2 ~ 3 business daysKDR Conversion & Cancellation takes 2 ~ 3 business days
88
CustodianCustodian
2. Instruction of KDR 2. Instruction of KDR Receipt Receipt
1. Application of KDR 1. Application of KDR ConversionConversion
6. KDR Issuance 6. KDR Issuance &&
KDR a/c CreditKDR a/c Credit
3. Share Transfer to KSD a/c 3. Share Transfer to KSD a/c & Application of KDR & Application of KDR
ConversionConversion
5. Notification of Share 5. Notification of Share Receipt Receipt
& Request for KDR Issuance& Request for KDR Issuance
Overseas Agent
Overseas Agent
Korean Agent
Korean Agent
4. Request for 4. Request for KDR IssuanceKDR Issuance
Share Conversion into KDR: KDR Price > Share PriceShare Conversion into KDR: KDR Price > Share Price
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
ShareholderShareholder
99
KDR Cancellation to Share: Share Price > KDR PriceKDR Cancellation to Share: Share Price > KDR Price
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
CustodianCustodian
1. Instruction of KDR Cancellation 1. Instruction of KDR Cancellation 2. Instruction of 2. Instruction of Share ReceiptShare Receipt
6. Confirmation of Share 6. Confirmation of Share TransferTransfer
5. Share Transfer5. Share Transfer
4. Instruction of Share 4. Instruction of Share TransferTransfer
Overseas Agent
Overseas Agent
Korean Agent
Korean Agent
3. Request for 3. Request for KDR KDR CancellationCancellation
KDR HolderKDR Holder
7. KDR a/c Debit7. KDR a/c Debit
1010
◈ ◈ Liquidity Premium of DR Issuing CompaniesLiquidity Premium of DR Issuing Companies
33%33%
Cross-listing by listinCross-listing by listing ADRsg ADRs
Cross-listing by listinCross-listing by listing GDRsg GDRs
Non Cross-listing by lNon Cross-listing by listing ADRsisting ADRs
14%14% 224%224%
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
Economic Benefit of KDR IssuanceEconomic Benefit of KDR Issuance
Craig Doidge, G. Andrew Karolyi, & Renee M. Stulz, “Has New York become less
competitive in global market? Evaluating foreign listing choices over time”
(Dice Center working paper, April 23, 2007), Analysis between 1997 to 2005
http://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-9.htm
1111
4. Right Exercise4. Right Exercise1. Notification of1. Notification of
Record Date, etcRecord Date, etc
5. Right Exercise5. Right Exercise
2-1. Notification of Record Date, 2-1. Notification of Record Date, etc.etc.
6. Right 6. Right
ExerciseExercise
KDR Holders can exercise rights only through KSD (Depositary) - KDR Holder → Participant → CSD → Depositary → Custodian → Issuing Co.
KDR Holders can exercise rights only through KSD (Depositary) - KDR Holder → Participant → CSD → Depositary → Custodian → Issuing Co.
Right Exercise of KDRRight Exercise of KDR
IndirectIndirectRight ExerciseRight Exercise
DirectDirectRight ExerciseRight Exercise
KDR Holders need to cancel KDRs to shares and exercise as shareholders - Minority Shareholders Right (Shareholder’s right to proposal, etc)
KDR Holders need to cancel KDRs to shares and exercise as shareholders - Minority Shareholders Right (Shareholder’s right to proposal, etc)
CustodianCustodian
Issuing Co.Issuing Co.
DisclosureAgent
DisclosureAgent
KDR HolderKDR Holder
2. Notification of2. Notification of
Record Date, etcRecord Date, etc
3. Notification of3. Notification of
Right ExerciseRight Exercise
KSD’s KDR Depositary Service for Foreign CompaniesKSD’s KDR Depositary Service for Foreign Companies
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0
250
500
750
1000
1250
1500
1750
2000
2250
Jan
-05
Fe
b-0
5
Ap
r-0
5
Ma
y-0
5
Jul-
05
Au
g-0
5
Oct
-05
No
v-0
5
Jan
-06
Fe
b-0
6
Ap
r-0
6
Jun
-06
Jul-
06
Se
p-0
6
Oct
-06
De
c-0
6
Jan
-07
Ma
r-0
7
Ap
r-0
7
Jun
-07
Jul-
07
Se
p-0
7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Korean Stock MarketKorean Stock Market
P2,014.09 P
(Oct. 2)
KOSPI
Daily Turnover
55.1% up from 2005 to 2006 year-end
KOSPI breaks previous record highs in October 2, 2007, 2,014.09P
US$ BilUS$ Bil
Index PerformanceIndex Performance
1313
Korean Stock MarketKorean Stock Market
(US$ Bil)
Market Cap.Market Cap.Market Cap.Market Cap.
ASX
SGX22
TSE2 4,614
1,096
384
4
14
13
HKEX 832
861
TSE 5,824
Trading ValueTrading ValueTrading ValueTrading Value
5
10
7
17
TSE 2,416
HKEX 1,173
ASX 1,829
SGX 709
Listed CompaniesListed CompaniesListed CompaniesListed Companies
HKEX7 1,714
ASX 8 1,689 KRX
16 834 KRX
13
10 1,339KRX
SGX26 180
Source: World Federation of Exchanges
Position among World Exchanges (2006)Position among World Exchanges (2006)
1414
Korean Stock MarketKorean Stock Market
High Investment DemandHigh Investment Demand
- Korean investors’ foreign equity investment increased dramatically
Efficient FinancingEfficient Financing
KoreaKorea Hong Kong Singapore
Market Cap. (Dec.’06) 834(16th)834(16th) 1,715(7th) 384(22th)
Trading Value (Jan.~Dec ’06) 1,339(10th)1,339(10th) 832(14th) 180(26th)
Turnover Velocity (Dec.’06) 171%(4th)171%(4th) 62%(24th) 58%(26th)
- High Liquidity
Source: World Federation of Exchanges (Dec. 2006)
(US$ Bil, %)
Abundant Liquid CapitalAbundant Liquid Capital - Over 580 bil. US$ of short-term deposits looking for investment opportunities
- KRX enjoys high liquidity compared to other competing exchanges
- Can raise more capital by issuing additional shares in the market easily
Listing Benefits of Korean Stock MarketListing Benefits of Korean Stock Market
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Korean Stock MarketKorean Stock Market
CriteriaCriteria Main BoardMain Board KOSDAQKOSDAQ
OperatingHistory
Continuous Operation for 3 years or more since establishment
EquityCapital
10 Mil USD or more 3 Mil USD or more
Total Shares Issued
1 Mil or more -
Share Ownership(Primary)
- 1,000 or more minority shareholders & - 30% or more shares held by minority shareholders*
(10% or more for large companies)
- 10% or more public offering in Korea*
- 500 or more minority shareholders & - 30% or more shares held by minority shareholders**
- 10% or more public offering in Korea**
* Exempted for secondary listings on main board
** For secondary listings on KOSDAQ, 500 or more minority shareholders & public offering in
Korea of 300,000 shares or more
Listing RequirementsListing Requirements
Listing Criteria & ProcedureListing Criteria & Procedure
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Korean Stock MarketKorean Stock Market
CriteriaCriteria Main BoardMain Board KOSDAQKOSDAQ
Sales - 30 Mil. USD or more (latest year) & 20 Mil. USD or more (3 year average)
-
Profit(Either one)
- 2.5 Mil. USD or more (latest year) & 5 Mil. USD or more (3-year total)*
- Ordinary income & no capital impairment (Latest year)
- ROE 10% or more
- 5% or more (Latest year ROE) & 10% or more(3 year ROE total)**
- Net profit of USD 2 Mil. Or more
Audit Opinion
- Unqualified & previous 2 fiscal years’ unqualified or qualified opinion (Latest year)
- Unqualified opinion (Latest year)
Others - No pending lawsuits, M&A or dishonor, no restrictions on share transferring, etc.
* No losses in operating, ordinary, net income
** For large companies, operating cash flow surplus & either ROE 3% or profit of USD 5 Mil
Listing RequirementsListing Requirements
Listing Criteria & ProcedureListing Criteria & Procedure
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Thank You!Thank You!
Contact: Jae Woong KIM (James)Contact: Jae Woong KIM (James)Tel: +82 2 3774 3426Tel: +82 2 3774 3426Fax: +82 2 3774 3432~5Fax: +82 2 3774 3432~5Email: Email: [email protected]
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