The KOSDAQ market is showing signs of revival. After dropping to 644.78 on July 30, the KOSDAQ index closed at 854.47 on August 10, marking a remarkable 32.5% increase over seven trading days. During this period, the market experienced several buy-side circuit breakers, and all 30 of the top market capitalization stocks saw gains, a rare occurrence. In contrast, the KOSPI's increase was limited to around 12%, highlighting the strength of the KOSDAQ's rebound. This is certainly welcome news for a market that has been overshadowed by large-cap semiconductor stocks.
The surge can be attributed to three main factors. First, the tightening of regulations on single-stock leveraged products has played a significant role. Financial authorities raised the minimum deposit for leveraged products tracking Samsung Electronics and SK Hynix from 10 million won to 30 million won, resulting in a tenfold decrease in related trading volumes. This aggressive investment capital is believed to have shifted to the KOSDAQ.
Second, there has been a notable influx of institutional funds. Over the past seven trading days, institutions purchased more than 1.5 trillion won worth of KOSDAQ stocks, with a particular focus on semiconductor materials, components, equipment, and the biotech sector.
Third, the government's policies aimed at revitalizing the KOSDAQ have contributed to this upswing. Measures such as raising the market capitalization criteria for maintaining listings and introducing delisting regulations for penny stocks are set to be followed by a system to distinguish between high-quality and struggling companies in the second half of the year. Coupled with the price attractiveness created by previous declines, these factors have laid the groundwork for the KOSDAQ's rebound.
However, it remains unclear whether this upward trend marks the beginning of a structural recovery or if it is merely a temporary spike due to supply and demand imbalances. Opinions in the securities industry are divided. Some analysts are optimistic, suggesting that the poor earnings have hit a bottom and a trend recovery is imminent, while others caution that the movement of high-risk, high-reward individual funds may only be temporary.
Indeed, the KOSDAQ previously surged past the 1,220 mark in April before plummeting nearly 50% until recently. Given the market's inherent volatility, it is premature to conclude that the KOSDAQ has fundamentally changed based solely on this recent surge.
It is particularly important to note that the momentum behind this rebound heavily relies on policy expectations and short-term supply shifts. The funds released from leveraged regulations flowing into the KOSDAQ are more of a reflexive effect, and concerns remain that if the volatility of large-cap semiconductor stocks increases again, the funds could quickly return to those stocks.
Ultimately, for the KOSDAQ to surpass the 1,000-point mark and establish a long-term upward trajectory, the rebound driven by supply and demand must be supported by solid earnings. The warmth of increased AI investments must translate into the semiconductor materials and components sector, while expectations for new drug technology exports should yield tangible results in the biotech industry to build market confidence.
The role of policymakers is also crucial. The fundamental reason the KOSDAQ has failed to escape its undervaluation compared to the KOSPI lies in weak corporate fundamentals. Strengthening delisting criteria to filter out struggling companies and implementing a system to distinguish between strong and weak firms is a step in the right direction, but the effectiveness of these measures must be consistently monitored during implementation to avoid becoming ineffective. Only when strong companies secure their positions among the top market capitalizations and struggling firms are naturally phased out can the KOSDAQ finally shed its long-standing label of a 'bubble market.'
While there is no need to overreact to short-term fluctuations, the current renewed interest from investors presents an opportunity for KOSDAQ companies to respond with solid earnings, and for the government to accelerate its policies for structural improvement. Ultimately, completing this temporary rebound into a sustained recovery is the responsibility of all market participants.
* This article has been translated by AI.
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