The KOSPI index has settled above 3000 and continues its rally, but the KOSDAQ index struggles to gain upward momentum. The abundant liquidity environment that has recently boosted the KOSPI index and expectations for the new government's policies to revitalize the stock market also apply to the KOSDAQ market, but the KOSDAQ index does not reflect this expectation.
The primary reason the KOSDAQ market's rise is lagging behind the KOSPI index is that the leading sectors driving the domestic stock market's ascent are concentrated in the KOSPI. Since the new government took office, the KOSPI index has risen, aided by the surge of the defense, finance, and nuclear power sectors. In contrast, these sectors are less significant in the KOSDAQ market. Instead, the KOSDAQ market is burdened by a larger share of second batteries and biotech stocks, which have seen poor stock prices recently.
Another issue is that the number of listed companies in the KOSDAQ market is excessively high. As the number of listed companies has increased, the number of stocks has also grown significantly, diluting stock value and preventing the index from rising.
Given the situation, 'day traders' are flocking to the KOSDAQ market, resulting in an increased turnover rate. The turnover rate in the KOSDAQ market is currently twice that of the KOSPI market.
During this month (Feb. 2 to 27), the KOSPI index rose 13.23% while the KOSDAQ index increased 5.57%. Until last month, the KOSPI index was fluctuating around the 2700 level but has rallied since the presidential election, closing at 3055 on the 27th.
In contrast, the KOSDAQ index only rose from 730 at the end of last month to 780 on the 27th. With the stock market recovering from the crash caused by the COVID-19 pandemic, the KOSDAQ index remains significantly lower than its level above 1000 in 2021.
The decisive factor distinguishing the fortunes of the two indices is the difference in leading stocks. The recent KOSPI bull market is driven by both traditional leading sectors like semiconductors and newly emerging sectors such as defense, finance, and nuclear power. While funds consistently flow into leading semiconductor stocks like Samsung Electronics and SK hynix, defense stocks such as Hanwha Aerospace (142%), Hyundai Rotem (285%), and LIG Nex1 (113%) have strongly pushed the index upward.
Lee Jae-myung, the president, has emphasized capital market reform and value-up policies since taking office, resulting in a bullish trend in the banking and securities sectors. Expectations of a boom in the nuclear power industry have also lifted utility and large construction stocks.
In contrast, it is difficult to find leading sectors driving the bull market in the KOSDAQ. Park Hee-chan, a researcher at Mirae Asset Securities, noted, 'The KOSDAQ market has a very low proportion of the sectors that are leading the rise in the KOSPI market,' adding, 'All the sectors related to defense, shipbuilding, and nuclear power are in the KOSPI market, and the securities and financial holding companies related to value-up are also absent from the KOSDAQ market.'
He continued, 'The KOSDAQ has a high proportion of biotech and new drug sectors, but the recent momentum of these industries has been low,' and he added, 'Above all, the high proportion of secondary batteries and other batteries is a weakness.' While Alteogen, the leading biotech stock in the KOSDAQ, has risen 27% since the beginning of the year, another representative KOSDAQ stock, secondary battery company Ecopro BM, and Ecopro have dropped 5% and 18%, respectively.
The sluggish performance of the KOSDAQ index is also rooted in structural issues. A financial investment industry insider stated, 'The KOSDAQ market has too many listed corporations,' and added, 'As a result, while the market capitalization has increased significantly, the index has struggled to rise.'
The KOSDAQ index is calculated using a market capitalization weighting method. As more companies enter the market, market capitalization has increased, but the number of stocks has also increased, which means that the value per stock has been diluted. Particularly, newly listed companies in the KOSDAQ market have failed to provide sufficient performance, resulting in falling stock prices that adversely affect the index.
'Day traders' are flocking to the KOSDAQ index due to its sluggish performance. According to the Korea Exchange, the turnover rate in the KOSDAQ market from February 2 to 26 was recorded at 32%, nearly double that of the KOSPI market's turnover rate (15.6%) during the same period.
The turnover rate is the value derived by dividing the trading volume over a specific period by the number of listed shares. A high turnover rate indicates that there was active trading of stocks during that period.
As the KOSDAQ market's sluggishness continues, major securities firms are often refraining from analyzing or forecasting the KOSDAQ trend. An insider from one securities firm stated, 'The KOSDAQ market frequently sees changes in leading sectors, and there are too many small to mid-sized stocks that are difficult to accurately assess in terms of corporate value, making analysis and forecasting relatively challenging.'