Korea Exchange Launches ‘New Deal’ Market Indices

The new indices track Korea’s largest battery, biotech, internet and gaming stocks. KRX plans to launch ETFs based on the new indices next month.

KRX (Korea Exchange) on Monday (7 September) launched five new market indices under Korea’s New Deal initiative, reports Korea Times.

The ‘New Deal’ initiative, announced by President Moon Jae-in in July, is aimed at promoting sustainable growth in the country, creating jobs, revitalising the economy and preparing for the post-Covid-19 era.

The new market indices track Korea’s largest battery, biotech, internet and gaming stocks – so-called ‘BBIG’ industries – subject to a review every February and August.

In the next month, KRX also plans to launch a carbon-efficient green New Deal index, which will track solar and wind energy companies.

In October, KRX plans to launch ETFs based on the new indices, in a bid to further draw liquidity into the local stock market.

Some participants such as CLSA are reportedly questioning the efficacy of the new indices, voicing concerns that the government is supporting sectors that are already fast-growing.

“Together with the KRX’s launch of Korean New Deal indices, the Korean government is essentially creating mania for the BBIG sectors which have already been red-hot even without government support,” CLSA said in a report on Monday.

Criticism has also been levied at the government’s plans to create a KRW 20 trillion fund over five years for the New Deal programme.

Under the scheme, tax incentives for retail investors to participate and the government’s status as a subordinate investor in the fund will effectively mean taxpayers are subsidising investor returns, critics say.