The market turned 30 in July. By Thursday, its index stood more than 30 percent below its starting level on today’s scale. In an otherwise rewarding year for many stock markets, including its bigger sibling KOSPI, the KOSDAQ has lost about 22 percent.
For two sessions this week, it seemed ready to shake off the gloom. The index gained 10.35 percent despite the Nvidia leadership drama and fears of a sharp U.S. Federal Reserve rate increase. Speculation about fresh government support gave investors something else to trade on. Then came the denial.
The KOSDAQ ended Thursday down 1.22 percent at 696.53 after financial authorities dismissed reports that they would announce another support package Friday. It remained 43.34 percent below its April intraday peak of 1,229.42.
President Lee Jae Myung on the day called for faster development of the KOSDAQ and reform of the venture capital ecosystem so innovative companies could raise funds as they grow. He urged consistent reforms to improve corporate value and shareholder returns, alongside measures to encourage long-term investment.
Earlier in the morning, the Financial Services Commission (FSC), Financial Supervisory Service and Korea Exchange had denied online claims of an imminent package. The rumors included loosening or phasing out the daily 30 percent stock-price limit and measures to encourage retail trading. The FSC warned that spreading groundless rumors could constitute unfair trading.
The positions are not formally contradictory. The president called for market development; regulators denied a specific announcement and its supposed contents. They were right to correct false information.
But investors were left with another round of presidential encouragement and regulatory rebuttals, without a clearer understanding of when promised reforms would change the market they own.
That gap is fertile ground for speculation. Broad pledges sustain expectations of official support. Rumors supply the missing details. Denials send investors scrambling to reassess them. Companies’ earnings and prospects struggle to compete with guesses about the next government announcement.
The scoreboard shows why investors are so eager for relief.
The KOSDAQ is 30.35 percent below its July 1, 1996 base level of 1,000 on today’s scale. The original base was 100 before a tenfold rebasing in 2004. The comparison excludes dividends, and the companies making up the index have changed. Even with those qualifications, it is a poor anniversary portrait for a market created to finance Korea’s future.
Nor is the weakness confined to its smallest companies. The KOSDAQ 150 closed at 1,149.35, down 47.27 percent from its March peak of 2,179.57. The index of its leading stocks has lost nearly half its value.
Thirty years on, it remains a junior market whose successful companies have reasons to leave and whose investors repeatedly turn to the government for reassurance.
The departures of NHN, now Naver, Kakao and Celltrion for the main board illustrate the problem. A Korea Capital Market Institute study found that the exit of stronger companies weakened KOSDAQ performance and could encourage further transfers. When growing up means moving elsewhere, the market loses the businesses that could demonstrate its own maturity.
Some companies nurtured on KOSDAQ have succeeded elsewhere. Korea has produced corporate successes without building an equally successful destination for sustained investment in its growth market.
Another weakness lies in the gap between financing innovation and evaluating it. Young technology companies may need years of research before producing meaningful revenue. Conventional earnings screens alone cannot distinguish a promising laboratory from a business surviving on its next capital raising.
A November study by the Korea Capital Market Institute found that companies admitted through technology-special listing provisions often continued to report losses while investing in research after going public. Their aggregate five-year stock performance concealed a wide divide between a small number of strong winners and many laggards.
Opening the listing gate is only the beginning of the market’s job.
Investors need reliable information about what happens afterward. For a biotech company, that means clinical progress, cash requirements and the commercial significance of licensing agreements. For an industrial technology company, it means whether announced partnerships produce customers, revenue and cash flow. Repeated announcements cannot substitute for evidence of progress.
External shocks compound these weaknesses. Higher interest rates make distant profits less valuable today, while uncertainty over AI spending can unsettle smaller suppliers. A market with credible disclosures and committed institutional investors is better equipped to assess those risks than one waiting for the next support rumor.
The government already has a reform agenda. In March, the FSC outlined market segmentation, faster removal of failing companies and measures to broaden institutional participation. It also noted that the benchmark used in public fund management evaluations had been changed to include a 5 percent KOSDAQ component. Investors should now be able to judge implementation and results.
Start with communication. The presidential office and financial authorities should publish a shared timetable identifying what has been approved, what remains under consultation and who is responsible for delivery. Rumor rebuttals should accompany accessible progress reports on actual reforms. A denial should leave investors better informed about policy.
Then make remaining on KOSDAQ attractive to successful businesses. A credible upper segment could help if admission rests on sustained disclosure quality, governance and operating performance. It must give investors a useful distinction and companies a reason to stay. Attaching a premium label without changing the investment experience would accomplish little.
Long-term capital also needs people equipped to deploy it. Independent research, specialist fund managers and evaluation periods that reflect the time needed to commercialize technology would help. Pension funds should retain investment discretion. Directing them to support an index would transfer the market’s problems to retirement savers without repairing its foundations.
Investor protection must become visible in daily practice. Authorities should pursue manipulation and misleading disclosures promptly, scrutinize financing arrangements that dilute existing shareholders and enforce credible exit standards. Genuine research risk deserves patient capital. Concealing setbacks or repeatedly selling implausible promises does not.
Reform should be measured by the quality of post-listing disclosures, progress toward commercialization, institutional ownership over time and the retention of strong companies. Listing counts, turnover spikes and a few buoyant sessions reveal far less about whether the market is doing its job.
Expanding price limits might change trading behavior. Fresh incentives might bring buyers through the door. Neither gives those buyers a durable reason to remain shareholders.
The president is right to emphasize long-term investment. His administration must now make that ambition concrete enough to displace the daily guessing game over stimulus. At 30, KOSDAQ needs investors who stay because companies deliver. Another rumor-driven rally would only postpone growing up.
* The writer is managing editor of AJP.
** The views expressed are the writer’s own and do not necessarily reflect those of AJP.
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