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S.Korea's Kakao Pay doubles on debut, allaying fears of regulatory scrutiny

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By Joyce Lee and Jihoon Lee

SEOUL (Reuters) - South Korean financial services app Kakao Pay Corp more than doubled in its trading debut on Wednesday, zooming ahead of the country's established finance companies in value, as investors were enticed by its growth prospects.

The stellar showing of Kakao Pay comes as a relief for investors who were worried about South Korea's heightened regulatory scrutiny of internet-based financial "platform" companies, and could indicate that an IPO boom in the country has room to run.

Shares of Kakao Pay, which is backed by China's Ant Group, closed at 193,000 won on Wednesday after opening at double the IPO price of 90,000 won. The benchmark KOSPI index finished 1.25% lower.

Kakao Pay's opening day performance is the strongest by a company in the main Korean index since Iljin Hysolus Co Ltd's shares gained 160% in September and gives it a market capitalisation of 25.2 trillion won ($21.3 billion).

That exceeds KB Financial's 23 trillion won and lags only the 28.2 trillion won of affiliate Kakao Bank - which listed in August - among financial companies.

"The red-hot IPO demand may have peaked sometime earlier but the market is still very friendly to platform business IPOs. Kakao Pay's solid debut is proof and dispels concerns about regulatory issues," said Sung Jong-hwa, analyst at eBest Investment & Securities.

"Among platform businesses, content and mobility listings will likely follow fintech next year."

Kakao Pay raised 1.5 trillion won from its IPO, but only after a regulator's warning led it to delay the offering by about a month and trim an indicative price range.

Valuation concerns had pummelled Krafton Inc, the South Korean company behind blockbuster video game "PlayerUnknown's Battlegrounds" (PUBG), in its trading debut in August.

Still, South Korean IPOs are set for a record-breaking 2021. Riding on domestic retail investor demand, they have already raised more than four times the funds they garnered in 2020.

Having started payments service in 2014, Kakao Pay saw annual transactions grow to 67 trillion won in 2020 from about 48 trillion in 2019. Transactions will likely grow sharply to around 100 trillion won in 2021, analysts have forecast.

It also provides financial product recommendations and mutual fund investments.

Kakao Pay, which plans to use a majority of the IPO proceeds for mergers and acquisitions, is aiming to introduce mobile stock trading services. It is also targeting a move into overseas markets such as China, Southeast Asia and Europe.

After the IPO, Kakao Corp, operator of South Korea's dominant chat app, remains a major shareholder with a stake of around 48%. Ant Group's Alipay Singapore Holding has a 39% stake.

($1 = 1,181.2300 won)

(Additional reporting by Heekyong Yang; Editing by Jacqueline Wong and Muralikumar Anantharaman)

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