Following the government’s recent announcement it plans to increase fiscal support for innovative startups and venture firms and revitalize second-tier markets, the Kosdaq has slowly rebounded, closing above the 700-marker last week for the first time in a year and two months.
And will the nation’s tech-heavy stock market get a boost from the government’s venture support? Some experts gave a positive outlook.
According to industry experts, while stock buying is likely to slow down as the end of the year approaches, the overall market is expected to continue to rise. The Kosdaq is expected to surpass 800 next year -- a mark it has not glimpsed the since November 2007.
They pointed to the government’s new venture business and Kosdaq visions, which have been further stimulated by improved investment sentiments, as reasons for the forecasts.
As part of the government’s latest economic blueprint, the Moon Jae-in administration says it will stimulate economic growth centered on developing small and medium-sized enterprises. The Korean government announced earlier this month that it will invest a total of 30 trillion won ($26.9 billion) over the next three years to help bolster startups and venture capitalists to secure a new sources of growth.
The government announced it would also lower taxes set on profits gained from stock options for startups companies and said it would boost second- and third-tier exchange markets, such as the Kosdaq, in an effort support SMEs in increasing capital gains garnered via stock sales.
“The Kosdaq has strengthened its upward momentum as the government announced its intention to gradually increase its investments in Kosdaq starting next year,” said Kim Yoon-suh, a researcher at Shinhan Investment.
“The Kosdaq index is on pace for an upward trend (and) can rise up to 850 by next year,” Kim said, adding that given the normalized earnings of the institutional supply-demand balance, the Kosdaq will begin to rally on the back of the rebound in momentum.
The government is also expected to recommend the National Pension Fund to allocate 10 percent of its funds to investments in the Kosdaq market starting next year. Of the 134 trillion won in equity investment in Korea’s pension fund as of September, the Kosdaq accounts for roughly 3 trillion won, or 2 percent.
On the back of high liquidity and low-cost listings, the market has been attracting an increasing number of local and foreign firms, especially in the IT and cosmetics sectors, adding to the markets value as a secondary market.
Earlier this year Kosdaq announced it expects to represent shares of more than 100 companies this year, mostly tech-concentrated firms. BDI Industry, a local petrochemicals plant, announced that it would be listed on Kosdaq from Thursday, while construction company SE Group is expected to go public next month.
In terms of market cap, non-Koreans owned some 27.11 trillion won, or 12.1 percent, of Kosdaq stocks, as of last month.
While the Kospi has risen more than 26 percent this year, the Kosdaq has lagged behind, increasing only 10 percent. However, after the long Chuseok holiday last month, the Kosdaq rose 7.4 percent, exceeding the Kospi growth rate of 6.8 percent during the same period.
The Kospi is continuing its record-breaking pace, closing at 2,557.97 on Friday, a 2.45 percent jump from the previous week. The index exceeded 2,500 for the first time Monday since it opened in 1983.
According to market data, individual investors have been net buying for the past four consecutive days and purchased 137.3 billion won in Kosdaq stocks in a single day Friday. Individual investors have also sold 244.3 billion won worth of stock in the Kospi market so far this month, compared to the 239.7 billion won in stock purchases on the Kosdaq.
By Julie Jackson (firstname.lastname@example.org