The KOSPI index, which broke through the 4,000 level, set a new record high again after two days. JP Morgan and KB Securities raised their outlook for next year's KOSPI index to 5,000. However, because the current domestic stock rally is centered on the KOSPI and large caps, investors are also focused on the outlook for the KOSDAQ index and whether the warmth will extend to small and mid caps.
The KOSDAQ index topped the 900 level for the first time in 1 year and 7 months recently, but it still has a long way to go to "CheonSDAQ" (KOSDAQ index 1,000). Since the start of this year, the KOSPI index has risen 70.12%, while the KOSDAQ index has climbed at most 31.56%.
According to IBK Securities, the gap in the rate of change between the KOSPI and KOSDAQ indexes has widened to its largest in about 20 years. Looking at relative annual returns, this year the KOSPI has surged 61%, while the KOSDAQ index's gain fell below 30%. The firm said the gap in which the KOSDAQ index's rise fails to keep up with the KOSPI's is the largest since 2000.
Many experts expect that, starting at year-end, an environment for a stock-by-stock market, including the KOSDAQ market, will take shape. They say the economic, policy, and flow-of-funds factors that have inevitably kept the KOSDAQ market and small and mid caps at a disadvantage for a while are likely to be resolved from year-end.
Byun Jun-ho, an analyst at IBK Securities, said, "The business sentiment of small and medium-sized enterprises will rebound with the current level as the bottom," and noted, "Earnings per share (EPS) of the KOSDAQ150 index has begun to rebound."
In addition, a resumption of interest rate cuts by the Federal Reserve (Fed) in the United States is also analyzed to be a favorable environment for the KOSDAQ and small and mid caps. Byun said, "In general, the KOSDAQ and small and mid caps include many growth stocks, so they can be more advantageous in a rate-cut phase," adding, "Attention should be paid to the possibility that the recent preference for growth stocks will spread to small and mid cap growth stocks."
The government's future policy direction is also expected to diversify from the existing Commercial Act amendment to revitalizing venture investment and reforming the KOSDAQ market. If the third Commercial Act amendment, which includes mandating the retirement of treasury shares, is pushed forward, most policy issues related to the KOSPI index or large caps will have finished coming to the fore.
Byun said, "The government's policy pattern is highly likely to diversify from next year into issues such as revitalizing the KOSDAQ and ventures," adding, "At this point, attention should be paid to government measures that could emerge from year-end to the first half of next year to improve or invigorate venture investment and the KOSDAQ market."
IBK Securities also predicted that among the top three industries by market cap weight that make up the KOSDAQ index—semiconductor materials, parts and equipment, biotech, and secondary batteries—related stocks will be the starting point of a stock-by-stock market.