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Cautions issued on KOSDAQ investors

Many analysts are cautioning against investing in stocks on the secondary KOSDAQ, which has been continuously bullish since early this year.

Describing the rally of the market -- which mostly trades stocks of small and medium-sized companies -- as an extraordinary bubble, they warn it could pop later this year and bring about heavy losses to small investors.

A research analyst on TV stressed Friday that some individuals are forced to dispose their stocks at low prices after investing in the market via “leverage,” or borrowing stocks on credit, as they failed to meet a certain level of collateral.

KDB Daewoo Securities likened the current situation to a similar development 15 years ago. An analyst of the state-controlled brokerage firm highlighted the rapid drop in the KOSDAQ index since early July and irregular fluctuation of biotech or pharmaceuticals-related stocks.

“The KOSDAQ index recently lost much in the wake of the slump in biotech-related stocks on the Nasdaq. Concerns are growing over the possibility of a bubble collapse that was seen in 2000,” the analyst said.

Compared to the last trading session of 2014 when it hit 542.97, the KOSDAQ climbed 44.1 percent to peak at 782.64 on July 20. Soon after, it fell by 7.3 percent in nine sessions to close at 725.06 on July 31.

Retail investors should closely monitor the coming situation because there is a feasibility that a group of institutional investors will shift their focus to the benchmark KOSPI after dumping KOSDAQ shares, said an insider in the financial market.

On the contrary, a few analysts claim that the market is under a correction phase, and think it is an opportunity for small investors to purchase additional stocks.

By Kim Yon-se (

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Korea Herald daum