KOSDAQ market capitalization surpasses 500 trillion won for the first time

Investment flocked in on expectations of activation measures

Surpassed 400 trillion won 4 years and 10 months ago

The KOSDAQ market's market capitalization intraday on the 4th surpassed 500 trillion won for the first time. Analysts say the market grew as institutional and foreign funds flowed in on expectations for the government's KOSDAQ activation measures to be announced within the year. 

On the day, the KOSDAQ index rose to 937.88 at around 9:35 a.m., recording a market capitalization of KRW 503.563 trillion (excluding preferred shares). It surpassed 500 trillion won about 4 years and 10 months after exceeding 400 trillion won on January 25, 2021.

Foreign and institutional investors net-bought at the market open, pulling up the index. On the day, foreigners and institutions each net-bought KRW 67.6 billion and KRW 80.2 billion worth, respectively. However, profit-taking selling by individuals (net-selling of KRW 69.5 billion) emerged, and the index closed down 0.23% at 929.83. The market capitalization based on the closing price was KRW 499.2416 trillion.

It is analyzed that expectations for the government's 'KOSDAQ boom-up' measures breathed life into the market. From last month's 28th, when The Korea Economic Daily's exclusive report was published, through the 4th, the KOSDAQ market's average daily trading value was KRW 11.1677 trillion, a 19.3% increase from the November remaining trading days' average (KRW 9.36 trillion). Park Ki-hoon of Korea Investment & Securities said, "Market supply-demand is improving just on policy expectations," adding, "The direction of the KOSDAQ market will be determined by the expansion of income deduction limits and the scale of venture capital investment."

KOSDAQ trading value also surged… Big investors flocked on 'boom-up' expectations

Trading value even surpassed KOSPI at times… Institutions net-bought over KRW 1 trillion in one week

Analysts say expectations for government activation measures contributed to the KOSDAQ market capitalization surpassing 500 trillion won on the 4th. After the activation plan became known, KOSDAQ trading value increased by about 20% over five trading days compared to November (1–27). On the 1st of this month, KOSDAQ trading value (KRW 11.8161 trillion) even exceeded that of the KOSPI (KRW 11.8056 trillion). Institutions have net-bought more than KRW 1 trillion (KRW 1.1577 trillion) in the KOSDAQ market from the 28th of last month through the 4th.

Because the KOSDAQ market's supply-demand environment has been considered a 'weakness' due to being dominated by individual investors, this change is seen as significant. A head of an asset management firm said, "For the KOSDAQ market to structurally rise, more large investors need to invest," adding, "They seem to have hopes for directions such as strengthening tax benefits for pension funds."

However, the intraday market capitalization exceeding 500 trillion won was also affected by newly listed Aimed Bio soaring 300% on the day (four times the IPO price), adding KRW 2.8229 trillion (market cap based on the closing price). Although the index fell compared to the previous trading day, the total market capitalization increased by about KRW 1.62 trillion.

With the KOSDAQ index closing at 929.83, it would need to rise about 7.5% more to pass 1,000. Observers point out that structural issues must be resolved to drive a sustained rise beyond the '1,000 KOSDAQ'—such as stopping the outflow of strong companies to the KOSPI, curbing listings of distressed companies, and ending indiscriminate paid-in capital increases. This is also part of the background for why market capitalization grew 24.1% while the KOSDAQ index rose 14.3% over the past two years.

Park Ki-hoon of Korea Investment & Securities emphasized, "In the past, KOSDAQ activation policies changed only the market's appearance while supply without demand expanded," adding, "Effective policies that induce institutional capital inflows, such as tax incentives, need to be implemented."

Reporter Park Han-shin phs@hankyung.com