KOSDAQ broke through the fabled 1,000-point barrier for the first time in four years. As KOSPI, which had surged past the 5,000 mark at the start of the year, entered a breather, liquidity appears to have shifted quickly to KOSDAQ, where relative undervaluation stood out. Coupled with expectations for the government's KOSDAQ value-up policy, analysts said a virtuous cycle is forming in which buying spreads not only to large caps but across small and mid-caps as well.
According to the Korea Exchange (KRX) on the 26th, the KOSDAQ index opened at 1,003.90 points and, boosted by buying of exchange-traded funds (ETF) by foreigners and individuals, extended gains to trade around 1,050 intraday. It is the first time in four years since late 2021 that the KOSDAQ index has surpassed 1,000 points. At one point intraday, the index jumped nearly 6%, triggering an intraday sidecar that limits buy quotes.
◇ KOSDAQ moves to "match pace" with KOSPI… net buying leads in small and mid-caps
The market is saying KOSDAQ, which has posted a lower relative return than KOSPI recently, has entered a "pace-matching" phase. While the KOSPI index rose 18.41% from the start of the year to on the 23rd, the KOSDAQ index gained only 7.4% over the same period.
A clear "money move" is also evident in flows. As of 12:39 p.m. on the day, foreigners and institutions were net sellers of 200 billion won and 580 billion won, respectively, in the KOSPI market, while in the KOSDAQ market, foreigners were net buyers of 360 billion won and institutions about 1.6 trillion won. Of the institutional net buying, however, about 1.3 trillion won was ETF money, indicating a strong influence from individual investors. As the session progresses, net KOSDAQ buying by foreigners and institutions is steadily expanding.
Buying is spreading broadly, not only to KOSDAQ large caps but also across small and mid-caps. As of 1:53 p.m. on the day, foreigners and institutions were net buyers of 298.6 billion won and 1.7883 trillion won, respectively, in KOSDAQ large caps; in mid-caps, foreigners and institutions were net buyers of 15.7 billion won and 238.1 billion won, respectively. In small caps, foreigners were net buyers of 71.6 billion won. Large, mid-, and small caps all show a buying advantage.
Bets are overwhelming that this KOSDAQ rally will not be short-lived. In fact, on the 23rd alone, a lump sum of 187.3 billion won flowed into the "KODEX KOSDAQ150 Leverage" ETF, which tracks twice the KOSDAQ150 index return. The "KODEX KOSDAQ150" also drew 91 billion won.
On the day, demand surged for completing the prerequisite training to trade KOSDAQ leverage products, temporarily crashing the Korea Financial Investment Association's online education site. Under current rules, individual investors must complete a one-hour online course from the association to invest in high-risk derivative-linked securities such as leverage ETFs and exchange-traded notes (ETN). It is a measure to protect investors.
◇ This time, KOSDAQ 3,000… expectations spread for market reform on the back of government resolve
Expectations for the government's "KOSDAQ 3,000" target are also acting as a catalyst for the shift of funds into the stock market. On the 22nd, news that the Democratic Party of Korea's KOSPI 5000 Special Committee proposed achieving the KOSDAQ 3,000 level using digital assets during a luncheon with President Lee Jae-myung spread policy expectations. Just six months ago, when the "KOSPI 5000" pledge first appeared, skepticism dominated the market, but the index's actual break above 5,000 proved the government's policy resolve is a powerful driver of gains.
On Toss Securities' investor community, reactions included, "When talk of KOSPI 5000 first emerged, there was much criticism and mockery, but it was ultimately achieved," adding, "If only underperforming companies are weeded out on KOSDAQ, reaching the 2,000 level is possible."
Beyond fund flows, expectations for market reform are cited as a fundamental driver of the KOSDAQ rise. To resolve the market's chronic trust deficit, the government is pushing a structural overhaul that tightens listing requirements and expedites the delisting of underperforming corporations.
Specifically, the plan is to expand technology-special listing centered on three key sectors—artificial intelligence (AI), energy storage systems (ESS), and the space industry—to attract high-growth companies, while strengthening exit criteria for weak corporations by expanding a dedicated delisting unit and raising revenue thresholds.
Institutional reforms to attract quality capital inflows will proceed in parallel. To spur pension funds to increase KOSDAQ investment, the government is reviewing an overhaul of fund management evaluation standards and plans to invest the 150 trillion won Public Growth Fund in advanced industries. Alongside expanding tax benefits for KOSDAQ venture funds, the introduction of an individual money account (IMA) and the provision of venture capital via short-term notes are expected to roll out, led by securities firms.
Na Jeong-hwan, an analyst at NH Investment & Securities, said, "As the government's overhaul of listing and delisting structures and policies to bring in institutional investors gather steam, the KOSDAQ index's additional upside potential will expand," adding, "In addition, stronger delistings of weak corporations and amendments to the Commercial Act can help resolve the KOSDAQ discount."