Analysts see Kosdaq reclaiming 1,000 as early as Q1 next year

An electronic board at a Hana Bank dealing room in Seoul shows the Kosdaq, Korea's secondary bourse, trading up 3.6 at 923.27 on Monday morning. (Newsis)
An electronic board at a Hana Bank dealing room in Seoul shows the Kosdaq, Korea's secondary bourse, trading up 3.6 at 923.27 on Monday morning. (Newsis)

Korea’s secondary bourse, the Kosdaq, is showing its strongest signs of revival in years, reigniting a long-standing question among investors: Can the tech-heavy market finally reclaim the 1,000 level?

Trading activity has surged as policymakers turn their attention to a market long seen as structurally weak. Average daily turnover on the Kosdaq reached about 11.5 trillion won ($8 billion) in December through Friday, according to data from the Korea Exchange — the highest level in more than two years and a 21 percent jump from November.

The rebound stands out against a cooling trend on the Kospi, the nation’s roughly 3,000-trillion-won main board that typically sets the tone for capital market flows. Average daily trading on the Kospi slipped 17 percent from the previous month to 14.5 trillion won during the same period, underscoring a rare divergence between the two markets.

The Kosdaq index has also firmed, with its monthly average rising nearly 4 percent to 924.7 in December from 890.2 in November.

Renewed optimism around the Kosdaq comes as the government has begun to directly confront what it sees as structural impediments weighing on valuations. President Lee Jae Myung has pointed to chronic concerns over volatility, market manipulation and rigid delisting rules as key factors undermining investor confidence.

“We need to demonstrate that any manipulative or illegal trading in Korea will result in total ruin,” Lee said earlier this month, urging authorities to accelerate the exit of insolvent companies.

A largely retail-driven market — with retail investors estimated to account for more than 80 percent — the Kosdaq is considered to have been sidelined during the foreign capital-led rally on the Kospi earlier this year. While the lead bourse surged about 76 percent over the year to an all-time high of 4,227 in early November, the Kosdaq gained just 37 percent. Its market capitalization, now about 500 trillion won, remains well below the 1,000 trillion won reached in 2021, when the index last topped 1,000.

Early signs of a cleanup are emerging. Delistings on the Kosdaq totaled 38 this year, more than double the past three-year average, according to the KRX. With tighter substantive screening rules applied from the second half of the year, companies removed through substantive examinations rose to 23, about three times the recent norm.

The quality of new listings also appears to be improving. The combined market value of newly listed companies reached 15.3 trillion won, a four-year high, even as the number of initial public offerings edged down to 84 from 88 a year earlier. The number of Kosdaq-listed firms with market capitalizations above 10 trillion won also climbed to a record 11.

More sweeping changes are set for next year as regulators move to address the Kosdaq’s chronic “easy in, hard out” problem. The minimum market-capitalization threshold for delisting reviews will rise from 4 billion won currently to 15 billion won next year, 20 billion won in 2027 and 30 billion won in 2028. Based on exchange estimates, about 14 companies could face delisting next year, swelling to as many as 165 by 2028.

In a recent market enhancement plan, the Financial Services Commission also outlined tailored rules under the technology-based special listing system for emerging sectors such as artificial intelligence, energy and aerospace, alongside proposals to encourage greater pension fund participation, including incorporating the Kosdaq index into benchmark returns used for fund performance evaluations.

Several brokerages recently projected that the Kosdaq could reclaim the 1,000 level as early as next year, including KB Securities, which forecast the index could rise as high as 1,150.

“Kosdaq should reach 1,000 in the first quarter, driven by the government’s efforts to boost capital flows into the market,” said Ha In-hwan, an analyst at KB Securities. “Kosdaq also benefits from early-year seasonality, while policy support, its underperformance relative to the Kospi and prospects for monetary easing by the US Federal Reserve all point to a stronger Kosdaq next year.”

With one trading day left in the year, both the Kospi and Kosdaq advanced Monday. The Kosdaq closed up 1.4 percent at 932.6, while the Kospi broke above 4,200 for the first time in two months, ending the session up 2.2 percent.


jwc@heraldcorp.com