KOSDAQ revamp set in motion: Picking potential beneficiaries [Stock+]

Authorities move to tighten rules on market cap, capital impairment, and more

Hunt for “beneficiary stocks” heats up amid expectations of a KOSDAQ clean-up

Brokerages split: semiconductors vs non-semiconductors

With the government saying it will conduct a sweeping cleanup of financially troubled companies listed on the KOSDAQ market, investors are busy searching for mid- to long-term beneficiaries. Expectations are rising for a qualitative upgrade of the KOSDAQ market. In the securities industry, views are split between those urging investors to ride a strong, semiconductor-led rally and those advising attention to “non-semiconductors,” which are expected to see profit improvement but have remained relatively overlooked.

According to Epic AI, an AI-based investment information platform, on the 19th LS Securities recently released a report setting a KOSDAQ index target of 1,400—implying upside of about 26.57% from the previous session’s close on the 13th (1,106.08).

Jeong Da-woon, a quant analyst at the firm, said, “Unlike the KOSPI, which has risen sharply this year, KOSDAQ returns have been relatively weak, and with the government’s KOSDAQ revitalization policy added, attention is shifting to KOSDAQ,” adding, “While it’s not on the same level as the main board where Samsung Electronics and SK Hynix are listed, KOSDAQ is also expected to make a further leap.”

On the drivers of a KOSDAQ rise, he said “inflows will come in on the back of government policy,” noting that in 2018 as well, when the government implemented a KOSDAQ revitalization policy, the index received an additional “premium.” The policy announced at the time included measures similar to today’s, such as expanding incentives for institutional investors to invest in KOSDAQ, creating KOSDAQ scale-up funds, and revitalizing KOSDAQ venture funds.

Recently, financial authorities announced “delisting reform measures for the swift and strict removal of troubled companies,” reflecting a “more listings, more delistings” (多産多死) stance—widening the door to new listings while quickly ejecting distressed firms after listing. This comes about two weeks after President Lee Jae-myung, on the 29th of last month, likened the stock market to a “department store” on his X (formerly Twitter), saying, “If there are many rotten products or fake products with no value, who would go?”

The centerpiece of the reform is the introduction, starting in July, of a new delisting requirement for “penny stocks” trading below 1,000 won. Authorities also brought forward the previously announced timetable for raising market-cap thresholds. As regulators move to remove troubled firms, the estimated number of KOSDAQ companies subject to delisting has increased from around 50 to as many as roughly 220.

As authorities showed firm resolve to clean up the market, a consensus formed in the brokerage industry that KOSDAQ’s upside elasticity will increase over the mid to long term. However, views diverge on where to invest within KOSDAQ.

Jeong recommended so-called “non-semiconductor” names to hold: PharmaResearch, SPG, Silicon2, DearU, Dongsung Finetec, DongKook Pharmaceutical, and Neowiz—eight in total. He explained, “These are stocks where an earnings improvement trend has been confirmed or is expected,” adding, “Optimistic outlooks for semiconductor materials, parts and equipment have already been largely priced in, so we recommend other sectors with greater upside potential.”

Some advise investing in semiconductor stocks even within KOSDAQ—from a so-called “momentum investing” perspective that says you should “get on the running horse.”

Kim Jung-won, an asset allocation researcher at Hyundai Motor Securities, said, “Even within KOSDAQ, semiconductors—unlike other sectors—continue to show the strongest alignment between earnings and share prices,” adding, “Semiconductor companies maintain high return on equity (ROE), so earnings momentum (drivers of improvement) is sufficient.” He went on to recommend “overweight” as the only sector among major industries.

Top KOSDAQ semiconductor names by market capitalization include Rino Industrial, Wonik IPS, EO Technics, HPSP, Soulbrain, Wonik Holdings, ISC, Dongjin Semichem, Hana Micron, and TCK.

Shin Min-kyung, Hankyung.com reporter radio@hankyung.com