The KOSDAQ index broke through the 1,200 mark for the first time in roughly 25 years and eight months, driven by an influx of foreign capital. Warmth from the KOSPI market, which had been rising on large-cap semiconductor stocks, spread to KOSDAQ-listed semiconductor materials, components and equipment names, while foreign buying rapidly improved supply and demand conditions.
According to the Korea Exchange on Wednesday, the KOSDAQ closed at 1,203.84, up 29.53 points or 2.51 percent from the previous session, surpassing 1,200 on a closing basis. The index had touched 1,200 intraday on February 27 and March 3 this year, but on a closing basis, it marked the first time since August 4, 2000 (1,238.80), when the index system was restructured during the dot-com bubble.
As tensions from the Middle East conflict eased, the KOSDAQ rose in 10 of the past 11 trading sessions starting from the 10th of this month. In particular, on the 13th, the 17th, and on Wednesday — sessions when the KOSPI stalled — the KOSDAQ maintained its upward momentum. "As foreign capital exited, KOSPI large caps took a breather, but the KOSDAQ broke through 1,200," said Lee Jae-won, a researcher at Yuanta Securities. "A thematic rotation has emerged, driven by small and mid caps and individual earnings momentum."
One of the key drivers of the rally is foreign demand. Foreign investors net purchased 685.7 billion won ($500 million) worth of KOSDAQ shares on Wednesday, pushing the index higher. This year, foreigners have bought a total of 2.3992 trillion won ($1.75 billion) worth of KOSDAQ shares, including 526.1 billion won in January and 1.2090 trillion won in February. Top net buys by foreigners on the KOSDAQ this month included Dongjin Semichem (160.1 billion won), Jeju Semiconductor (158.6 billion won), Jusung Engineering (138.4 billion won), Hana Micron (111 billion won) and HLB (110.3 billion won). A distinctive feature is that buying was concentrated in growth stocks in the semiconductor and biotech sectors.
The market views the rally as a spillover from the recovery in global risk appetite and the large-cap semiconductor-led rally into KOSDAQ stocks. While Samsung Electronics (005930.KS) and SK hynix (000660.KS), which had recently hit record highs, paused on Wednesday, the KOSDAQ showed strength centered on semiconductor and materials, components and equipment stocks, with Peptron rising 10.08 percent and Jusung Engineering up 6.63 percent. Top KOSDAQ pharmaceutical and biotech stocks by market capitalization, including Alteogen (3.22 percent) and ABL Bio (2.41 percent), also posted sharp gains.
The surge in KOSDAQ exchange-traded funds (ETFs) this year is also seen as a factor that has energized the market. Notably, last month saw the simultaneous listing of Samsung Active Asset Management's "KoAct KOSDAQ Active ETF" and Timefolio Asset Management's "TIME KOSDAQ Active ETF," intensifying competition. In about a month, the two ETFs attracted 1.0308 trillion won and 516.4 billion won in funds, respectively.
Experts pointed out that fundamental structural reform is needed for the KOSDAQ to settle into a long-term uptrend. Liquidity inflows can become more active only when earnings support the rally and investors gain confidence. Samchundang Pharm, the fifth-largest KOSDAQ stock by market cap, recently saw its share price surpass 1 million won to become a so-called "emperor stock" amid controversy, only to be halved thereafter. Leeno Industrial, the sixth-largest by market cap, saw its share price fall more than 5 percent in the NextTrade after-market compared to the regular session on Wednesday, after it disclosed that its major shareholder would dispose of 863.1 billion won (9.18 percent) worth of shares through block deals over the next month.
The government is pursuing policies to revitalize the market, including expanding pension fund investment in the KOSDAQ and introducing a "promotion and relegation system" within the market. In addition, it plans to run a "delisting intensive management period" through June next year, tightening four key requirements including market capitalization, penny stocks, capital impairment and disclosure violations. "In the short term, as the KOSPI market has risen significantly centered on semiconductors, the warmth is spreading to secondary battery and KOSDAQ growth stocks," said Jung Yong-taek, managing director of IBK Investment & Securities' research division. "For a long-term uptrend, activating the delisting of penny stocks and ensuring more thorough corporate disclosures are necessary."
