Semiconductor Suppliers, Power Infrastructure and Robot Stocks Keep ‘1,000 Kosdaq’ Hopes Alive

Promising Kosdaq Picks for the Fourth Quarter

Beyond Memory-Equipment Makers

Robotics, LS Materials and Others

Focus on Companies Poised for Higher Valuations

The Kosdaq index has climbed back above 900 for the first time in about three months, but it has struggled to extend the rally. After the sharp recent advance, securities firms say investors should focus less on further index gains and more on stocks backed by earnings and orders in the fourth quarter. Semiconductor materials, parts and equipment makers have led the rebound, while robotics and data-center power companies are being cited as candidates for the next market leaders.

Chip-Supply Rally Helps Kosdaq Beat Kospi

According to the Korea Exchange, the Kosdaq has risen 4.24% this month through Oct. 8. The Kospi fell 3.1% over the same period. The Kosdaq, which once topped 1,000, slipped below that level in June and fell into the 600s in late July, before trimming losses with gains of 15.91% in August and 2.59% in September.

Trading has also become more active. Average daily turnover on the Kosdaq reached 8.6943 trillion won this month, up from 5.9868 trillion won in August. On the Kospi, average daily trading value fell to 19.8355 trillion won from 25.846 trillion won over the same period.

Semiconductor materials, parts and equipment stocks are at the center of the Kosdaq rebound. The move reflects expectations that increased capital spending by major memory makers such as Samsung Electronics Co. and SK Hynix Inc. will translate into more equipment orders for new production lines. Expanding high-bandwidth memory, or HBM, output is also seen as a growth driver for backend chip companies involved in packaging and testing.

Outside semiconductors, robotics and data-center power companies are drawing attention. Kiwoom Securities named Robotis Co. and LS Materials Ltd. among its small- and mid-cap stock picks for this month. Robotis is expanding production capacity for actuators that control robot-joint movement. “Competition is intensifying as big tech companies enter the humanoid market,” Kiwoom Securities analyst Kim Hak-jun said. Only a small number of component suppliers, however, offer both quality and a diverse product lineup, which he said supports higher valuations for those companies.

Kiwoom said LS Materials is likely to generate sales this year after completing product certification for supplies to a North American fuel-cell customer. Investors are also watching whether it can secure additional supply contracts as data-center power demand rises. Kiwoom’s recommended list also included Dreamtech Co., which is expanding customers for server-memory modules, and Taewoong Co., which is expected to benefit from orders related to small modular reactors, or SMRs.

Kosdaq Active ETFs Outperform the Market

Performance among exchange-traded funds investing in the Kosdaq has varied widely. In particular, active products with heavy exposure to semiconductor materials, parts and equipment stocks have recently posted strong returns. The best-performing Kosdaq-related ETF over the past month, from Sept. 8 to Oct. 8, was DS Kosdaq Active. It gained 29.12% during the period, nearly triple the roughly 10% return of passive ETFs tracking the Kosdaq 150 index.

DS Kosdaq Active mainly invests in semiconductor materials, parts and equipment names including Simmtech Co., with a 10.99% weighting, DKT Co. at 4.64%, and Leeno Industrial Inc. at 4.40%.

It was followed by TIGER Kosdaq Active, up 26.28%, which also held large weightings in semiconductor materials, parts and equipment stocks such as Simmtech, Hanyang Digitech Co., TSE Co. and Fino Corp. TIGER Kosdaq 150 IT, which tracks the Kosdaq 150 IT index composed only of information-technology, hardware and semiconductor materials, parts and equipment companies within the Kosdaq 150, rose 23.66% over the same period.

Some analysts say the Kosdaq could continue to outperform the Kospi in the fourth quarter. “With foreigners not actively buying Korean stocks, retail investors with room to buy on dips are standing out,” Eugene Investment & Securities analyst Hur Jae-hwan said. The Kosdaq, where retail investors play a bigger role, may do slightly better than the Kospi, he added.

Still, a quick return to the 1,000 level may be difficult. Hyundai Motor Securities analyst Kim Jae-seung said interest has grown in semiconductor materials, parts and equipment stocks that were relatively overlooked during the first-half semiconductor rally, but there has been no clear change in earnings or investor sentiment, the fundamentals of the market. High interest rates also remain a burden for small- and mid-cap growth stocks.

Yang Ji-yoon, Hankyung.com reporter yang@hankyung.com