Market Trends and Investor Behavior
The KOSPI, which has been showing an upward trend, has experienced a slowdown in its growth. However, this shift has led to increased interest from individual investors in the KOSDAQ market. As a result, there has been a significant rise in trading volume on the KOSDAQ market this month.
According to the Korea Exchange, the daily average trading volume on the KOSDAQ market from the 1st to the 26th of this month reached 11.48 trillion Korean won. This is the highest level in two years and four months since August 2023 (daily average of 12.122 trillion Korean won). Compared to last month’s daily average trading volume of 9.479 trillion Korean won, it surged by 21%. In contrast, the trading volume on the Korea Exchange’s securities market (KOSPI) notably decreased. During the same period, the KOSPI’s daily average trading volume was 14.461 trillion Korean won, a 17% decrease from the previous month’s 17.433 trillion Korean won.
Increased Turnover and Diverging Sentiment
Along with the increase in trading volume, the ‘churn’ in the KOSDAQ market has also become more active. The daily average turnover rate on the KOSDAQ until the 26th of this month was 2.30%, a 15% increase from the previous month’s 2.00%. This contrasts with the KOSPI’s turnover rate, which decreased by 19% from 0.53% to 0.43% during the same period. The turnover rate is the ratio of trading volume to market capitalization, indicating that a higher figure means more frequent trading among investors.
Market sentiment is also diverging. The KOSPI has seen a contraction in investor sentiment due to occasional concerns about an artificial intelligence (AI) bubble, leading to continued volatile trading. The KOSPI recorded an all-time high of 4,226.75 during trading on the 4th of last month but has not set a new record high for nearly two months. In contrast, the KOSDAQ has seen buying momentum surge following media reports that the government is preparing measures to boost the KOSDAQ market, raising expectations of a ‘KOSDAQ 1,000’ milestone.
Individual Investor Activity
The movement of individual investors in supply and demand has also been notable. This month, individual investors have net purchased 626 billion Korean won worth of KOSDAQ stocks but net sold 9.797 trillion Korean won worth of KOSPI stocks. This is the opposite of last month’s trend, when individuals net sold 480 billion Korean won worth of KOSDAQ stocks and net purchased 9.287 trillion Korean won worth of KOSPI stocks.
Policy Expectations and Market Outlook
Experts believe that the KOSDAQ should continue to be closely watched due to remaining policy expectations. The recent launch of the ‘National Growth Fund,’ which invests in advanced industries such as biotechnology and secondary batteries, and the securities firms’ comprehensive investment account (IMA) system are cited as favorable factors for the KOSDAQ.
Tae Yoon-sun, a researcher at KB Securities, explained, “The introduction of the IMA system for securities firms in November is expected to drive capital inflows into small and mid-cap stocks.” He added, “The IMA is obligated to invest a certain percentage of raised funds into venture capital, with the ratio set to increase gradually to 10% next year, 20% in 2027, and 25% in 2028.” He continued, “Based on the KOSDAQ market’s seasonality, which typically shows strength from January to February, policy momentum, and the potential for KOSDAQ revitalization initiatives, a rise in the KOSDAQ market, which has been relatively overlooked, is anticipated.”
Performance Gap and Future Prospects
The fact that the KOSDAQ’s year-to-date growth rate has been lower than the KOSPI’s is also cited as a factor fueling expectations for further gains. So far this year, the KOSDAQ index has risen by 36%, half the 72% increase seen in the KOSPI during the same period.
Na Jeong-hwan, a researcher at NH Investment & Securities, stated, “While the KOSDAQ index is showing an upward trend due to expectations of KOSDAQ revitalization policies, the performance gap with the KOSPI index remains.” He added, “Once the government’s initiatives to reform the listing and delisting structure and policies to attract institutional investors are fully implemented, the KOSDAQ index is expected to have greater room for additional gains.”
Challenges and Uncertainties
However, variables remain. Pressures from rising import prices due to exchange rate increases and uncertainties surrounding domestic interest rate cuts are cited as factors that could constrain further gains in the KOSDAQ. Lee Woong-chan, a researcher at iM Securities, pointed out, “As situations like improvements in domestic demand or interest rate cuts are unlikely to materialize, it seems difficult to expect the KOSDAQ or small and mid-cap stocks to outperform the market simply based on current conditions.”