KOSDAQ clears 'Cheon-sdaq' milestone—how far can it run? NH Investment & Securities: "1,500 is also possible"

NH Investment & Securities on the 28th raised its KOSDAQ target from 1,100 to 1,300. It cited the fact that, with the KOSPI expected to rise, the KOSDAQ has historically traded at a premium to the KOSPI. It also said that if the market enters an overheating phase on expectations for KOSDAQ revitalization policies and expanding liquidity, there is room for the index to climb to 1,500.

Kim Jong-young and Na Jung-hwan, analysts at NH Investment & Securities, said, "1,300 points is an average derived by applying both the price-to-earnings ratio (PER) and price-to-book ratio (PBR) methods," adding, "We expect the KOSPI and KOSDAQ to rise in turns." The KOSDAQ closed at 1,082.59 on the 27th. On the 26th, it topped 1,000 points for the first time in about four years.

First, under the PER approach, the target was calculated by applying a PER of 38x—its past-peak level—to the estimated 2027 KOSDAQ net profit. The 38x multiple corresponds to the period when both the KOSDAQ index and net profit peaked in 2021. The firm said this reflects a phase when growth expectations and a liquidity premium were maximized.

Under the PBR approach, it applied a target PBR of 2.8x to the KOSDAQ’s recent total equity. It reflected the fact that the KOSDAQ’s 2021 PBR peak was 2.7x and forecasts that the KOSPI’s PBR could rise to 2x going forward. It also took into account that, historically, the KOSDAQ’s PBR has been higher than the KOSPI’s, with an average gap of 0.6x.

The firm said that if the market enters an overheating phase, the KOSDAQ could rise to 1,500. Kim explained, "This result comes from applying the KOSDAQ market-cap growth rates seen after past venture and innovation policies were implemented to the market cap at the time of last December’s KOSDAQ policy announcement," adding, "It corresponds to the upper-end scenario (peak level) that assumes policy momentum and investor sentiment are maximized at the same time."

He added, "After KOSDAQ revitalization policies were announced, the KOSDAQ’s market cap generally showed an upward trend, supported by policy effects," and analyzed that "when policies included the inflow of policy funds and measures to foster specific growth industries, the market-cap growth effect was clearly evident. In particular, when capital supply and support for new-industry growth were pursued simultaneously, the KOSDAQ market’s size expanded rapidly."

Kim highlighted that when KOSDAQ revitalization policies were put into full swing in 2017, KOSDAQ market cap increased by about 64%. He said, "If a similar pattern to past policy phases emerges, KOSDAQ market cap could expand from around 500 trillion won as of last December to the 820 trillion won range over the medium term."

In the early stage of a KOSDAQ upcycle, it expected higher relative returns for companies among the top market-cap names with high short-selling balances. That is because share prices can strengthen if short sellers move to cover.

Kim added, "Once business development company (BDC) products are launched from mid-March, demand will increase for KOSDAQ small caps with strong growth potential and technological competitiveness."

Jin Young-ki, Hankyung.com reporter young71@hankyung.com