On March 6, the Kosdaq index finished trading at 1154.67, a 3.43% increase. This continued upward momentum defied expectations of a consolidation following the previous day’s 14% surge. The Kosdaq’s strong performance triggered a buy-side circuit breaker – a temporary halt to program trading – for the second consecutive day.
Since the onset of the conflict with Iran, the Kosdaq index has outperformed the Kospi. It has recovered to its pre-war level of 1192.78. The Kospi, however, remains 10.5% below its level prior to the conflict. On March 6, the Kospi closed at 5584.87, up 0.02%.
Foreign investment funds have been directed toward the Kosdaq market. Foreign and institutional investors have net-purchased stocks worth 3.44 trillion won and 2.249 trillion won respectively on the Kosdaq since February. Even after the start of the war, they purchased an additional 2.231 trillion won and 1.483 trillion won worth of stocks, respectively. Conversely, foreign investors have been net sellers on the KOSPI, offloading 28.118 trillion won worth of shares since last month.
Focus on Bio, Robotics, and Secondary Battery Stocks… Billions of Won Flow into Kosdaq ETFs
Strong Government Commitment to Market Activation and Anticipation of Active ETF Launch Play a Role
Although the Kospi has been impacted by geopolitical tensions in the Middle East, foreign and institutional investors are shifting capital into the Kosdaq market. Government policies aimed at revitalizing the Kosdaq, combined with expectations for the launch of actively managed ETFs, are driving investment into sectors like biotechnology, robotics, secondary batteries, and semiconductors. However, some observers express concerns about potential overheating, as the gains are largely driven by policy expectations rather than fundamental performance.
◇Foreign and Institutional Investors Accumulate Kosdaq Shares
According to the Korea Exchange, foreign investors have net-purchased 3.44 trillion won worth of Kosdaq shares since last month. This buying pressure has intensified since the outbreak of the conflict between the United States, Israel, and Iran, with 2.231 trillion won purchased so far this month. In contrast, they have focused on profit-taking in the KOSPI, selling 70.45 billion won worth of shares this month and a total of 28.118 trillion won since last month.
Notably, on March 5, the Kosdaq index recorded its highest-ever daily gain of 14.1%, with foreign investors leading the surge by purchasing 838 billion won worth of shares. Institutional investors have also been actively accumulating Kosdaq stocks, purchasing 1.483 trillion won this month and 2.249 trillion won since last month.
While the Kospi has been weighed down by the Middle East conflict, foreign investors have concentrated their purchases on biotechnology, robotics, secondary battery, and semiconductor materials, parts, and equipment (MP&E) stocks on the Kosdaq. This month, they net-purchased 88 billion won worth of shares in semiconductor inspection equipment manufacturer Kogyoung. AlteoGen (72 billion won), EcoPro BM (60 billion won), ABL Bio (48 billion won), and Aimed Bio (45 billion won) followed closely behind.
Inflows into Kosdaq ETFs are also increasing. According to ETFCheck, ‘KODEX Kosdaq 150’ attracted 599.6 billion won over the past month, ranking fourth in inflows. ‘TIGER Kosdaq 150’ (288.4 billion won) also ranked 12th.
◇Growing Expectations for Government Policies and Active ETFs
The influx of capital from foreign and institutional investors into the Kosdaq market is fueled by growing expectations for government policies aimed at revitalizing the market. In December of last year, the government announced a comprehensive plan to activate the Kosdaq market, focusing on expanding the supply of venture capital. The government-sponsored 150 trillion won National Growth Fund, slated to be established over the next five years, is expected to drive a rally in the Kosdaq market. Discussions are also underway to increase pension funds’ investment allocation to the Kosdaq market. Lee Kyung-min, a researcher at Daishin Securities, stated, “The recent government policies to revitalize the capital market, including the mandatory disclosure of shareholder return plans for companies with a price-to-book (PBR) ratio of less than 1, are aimed at normalizing the stock prices of small and mid-sized undervalued companies.” He added, “Capital that has realized profits in large semiconductor companies is flowing into the Kosdaq market, aligning valuations.”
The launch of Kosdaq active ETFs this month is also expected to boost the Kosdaq index. Samsung Active Asset Management and Timefolio Asset Management will launch active ETFs utilizing the Kosdaq or Kosdaq 150 index on March 10, while Hanwha Asset Management will launch one on March 17. Unlike passive ETFs that simply track an index, active ETFs allow fund managers to actively select portfolio holdings. The securities industry anticipates a long-term inflow of capital from institutional investors into the Kosdaq market. Kim Byeong-yeon, a researcher at NH Investment Securities, stated, “Considering that the PBR gap between the Kospi and Kosdaq indices has widened to 1.4 times in a liquidity-driven market, the Kosdaq index has the potential to rise to 1500 (PBR of 3.4 times).”
However, unlike the Kospi, where earnings estimates have risen sharply, the Kosdaq’s gains are based on policy expectations, which is a chronic weakness of the market. The 12-month forward price-to-earnings (PER) ratio of the Kosdaq market is approximately 29 times, exceeding the five-year average of 18 times. Weak earnings are also a stumbling block. According to Daishin Securities, approximately 42% of all Kosdaq-listed companies were in the red based on last year’s earnings estimates. While the government is accelerating the delisting of zombie companies, there are also concerns that many companies still need to be restructured.
Shim Seong-mi 기자 smshim@hankyung.com
