Let's Soar KOSDAQ Too... Approaching the 900 Mark

[Asia Economy Reporter Koh Hyung-kwang] While the KOSPI continues to break record highs day after day, the KOSDAQ index is also closing in on the 900-point mark. Foreign investors, who had shown a selling bias earlier this year, have recently turned to buying, driving the index upward. Experts predict that the foreign buying trend will continue for the time being, and the KOSDAQ index will soon attempt to surpass the 900-point level.

According to the Korea Exchange on the 2nd, as of 10:20 a.m., the KOSDAQ index rose 0.23% (2.04 points) from the previous trading day to 893.33. It has risen for five consecutive trading days, gaining 3.1% (28.21 points) during this period. Compared to the index of 792.65 on October 30, it has surged nearly 13% in just over a month. Only 6.67 points remain to reach the 900-point mark.

The last time the KOSDAQ index closed above 900 points was on April 17, 2018, at 901.22. This year, it reached an intraday high of 905 points in September but did not close above 900. The highest closing point this year was 899.46 on September 15. The all-time highest KOSDAQ index was 932.01, recorded intraday on January 30, 2018.

Starting the year at 674.02, the KOSDAQ index plunged to 428.35 on March 19 due to the COVID-19 pandemic. However, massive liquidity and inflows into pharmaceutical and bio stocks led to a strong rebound. From late September, uncertainty over the U.S. presidential election and the government's plan to impose capital gains tax on major shareholders caused another correction. After the U.S. election concluded and the government softened its stance on the capital gains tax, uncertainty eased, and the index has shown a strong upward trend since early last month.

The recent upward trend was significantly supported by the return of foreign investors, who had been net sellers in the KOSDAQ market for two consecutive months in September (-300.6 billion KRW) and October (-96.7 billion KRW). Foreign investors purchased a total of 847 billion KRW in the KOSDAQ market in November. This is the third monthly net buying after June (419 billion KRW) and August (125.3 billion KRW), marking the largest monthly investment amount. Individual investors also continued their net buying streak in the KOSDAQ market last month with 630.3 billion KRW, contributing to the index rise. On the previous day, foreign and individual investors net bought 20 billion KRW and 127.2 billion KRW respectively, leading the index upward.

The stocks mainly purchased by returning foreign investors were in the pharmaceutical and bio sectors. The stock with the highest net foreign buying in the KOSDAQ market last month was Celltrion Healthcare, with purchases worth 94.5 billion KRW. Following were Celltrion Pharm (55.6 billion KRW), MedPacto (47.1 billion KRW), Osstem Implant (44.7 billion KRW), and Hugel (29.5 billion KRW), with five of the top ten foreign net bought stocks belonging to the pharmaceutical and bio sectors.

Experts expect that foreign capital will continue to flow steadily into the KOSDAQ market, led by pharmaceutical, bio, and IT component stocks, pushing the index above the 900-point level. Kang Bong-joo, a researcher at Meritz Securities, said, "In the KOSDAQ, where pharmaceutical and bio stocks have a large share, related stocks are leading the rise due to expectations for COVID-19 vaccines. Going forward, foreign investment will continue focusing on semiconductors and secondary batteries, showing a strong upward trend. Although the KOSDAQ's upward momentum started later than the KOSPI, it is likely to surpass 900 points and possibly break 1,000 points next year." Byun Jun-ho, a researcher at Heungkuk Securities, also said, "Individual investors tend to show large-scale selling in the KOSDAQ market mainly in December, which may cause a correction, but they buy back as much as they sold at the beginning of the year. Next year, the index is expected to rise above 900 points and show a strong trend."