The KOSDAQ market, celebrating its 30th anniversary this year, remains mired in poor performance. After peaking at 1,229 in April, the index has fallen back to the 900s, starkly contrasting with the KOSPI, which has surpassed 9,000.
Market analysts point out that "the KOSDAQ currently offers no investment appeal." With a lack of attractive companies, both money and investors are leaving the KOSDAQ. Daily trading volume has dropped by over 40% compared to a year ago. As investors exit, the index continues to decline in a vicious cycle. This year, seven out of ten KOSDAQ-listed companies have seen their stock prices fall. The question remains: how long will the KOSDAQ's slump continue?
KOSPI Soars While KOSDAQ Only Rises 4%
According to the Korea Exchange, the KOSPI has seen a 144% increase over the past year, while the KOSDAQ has only managed a 4.4% rise, essentially stagnating. This makes it the worst-performing major stock market among developed countries. The performance of individual stocks is equally dismal. Compared to the first trading day of the year on January 2, a total of 1,230 KOSDAQ stocks have seen their prices decline. This represents 71.18% of the 1,728 stocks listed, excluding SPACs and preferred shares.
With far more declining stocks than gaining ones, the market size has remained stagnant. The KOSDAQ's market capitalization expanded from 404 trillion won at the end of June last year to 662 trillion won by the end of April this year, even reaching 670 trillion won earlier last month. However, it has since reversed course, dropping from 586 trillion won on June 1 to about 562 trillion won by June 18.
Trading Volume Drops 40% as Investors Depart
As the market's attractiveness wanes, investors are leaving the KOSDAQ. A significant drop in trading volume signals this trend. From the start of June until June 19, the average daily trading volume on the KOSDAQ was 667.44 million shares, a 39.68% decrease from the same period last year (1.1 billion shares). While trading value has increased, the average daily trading value rose from 5 trillion won last August to 15 trillion won in early May this year. However, the sharp decline in trading volume this month has dampened investor sentiment. The funds entering the KOSDAQ are primarily concentrated in a few large-cap stocks. The proportion of foreign investors has also increasingly focused on large-cap stocks.
"Bad Stocks Drive Out Good Ones: Structural Issues"
Experts point to the prevalence of poor-performing companies as the fundamental reason the KOSDAQ cannot escape its current predicament. The presence of many underperforming firms has negatively impacted even the strong companies. According to the Korea Exchange, of the 1,203 KOSDAQ-listed companies, 511 reported net losses in their last fiscal year, representing 42.48% of the total. The market capitalization of companies with less than 100 billion won is also concerning. While the number of such companies was projected to decrease from 970 (57.67%) at the end of Q4 2024 to 925 (53.13%) by the end of 2025, it has instead increased to 999 (57.17%) this year. Despite a 42.52% rise in the KOSDAQ index since the end of 2024, the large-cap sector has not expanded.
The issue of low-priced stocks remains a chronic problem. The number of stocks priced below 1,000 won has decreased from 177 (10.17%) at the end of last year to 148 (8.47%) currently, but they still account for one in twelve KOSDAQ-listed companies.
'Measures' Proposed, But Concerns Arise
In response to the KOSDAQ's struggles, financial authorities plan to implement stricter delisting criteria for low-priced stocks and introduce a tiered market system starting in July. However, the effectiveness of these measures remains uncertain. Some companies are resorting to superficial tactics, such as stock consolidations, to evade the stricter delisting criteria. There is also significant industry pushback against the proposed tiered system.
In particular, the venture capital sector is concerned that the introduction of a tiered system will exacerbate hierarchies within the KOSDAQ and increase stigmatization. A securities industry representative stated, "The delisting of low-priced stocks and the introduction of a tiered system essentially mean the exit of underperforming companies. While there is considerable industry resistance, if we do not take action now, the KOSDAQ may become nearly impossible to revive."
* This article has been translated by AI.
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