NH Investment & Securities raised this year's KOSDAQ target index to 1,300 points from 1,100. The move reflects expectations for improved supply-demand conditions on the back of the KOSDAQ market's surge since the start of the year and the government's revitalization measures. It also said the top end of the range could open up to as high as 1,500 points if the market overheats.
Researchers Kim Jong-young and Na Jeong-hwan at NH Investment & Securities proposed an upward revision of this year's KOSDAQ target index to 1,300 points in a report on the 28th. They cited valuation re-rating, combining the price-earnings ratio (PER) and price-to-book ratio (PBR), as the key basis for raising the outlook.
Kim said, "In the PER approach, we applied 38 times—the 2021 level when net income peaked and the liquidity premium was maximized—to the expected 2027 net income," adding, "In the PBR approach, we set the target PBR at 2.8 times, considering the historical premium of 0.6 times versus KOSPI and the possibility of future KOSPI PBR expansion." The average of the values derived from the two approaches is 1,300 points.
In particular, in an overheated market scenario, it said reaching 1,500 points would also be possible. This figure is calculated by applying, to the present, the market capitalization growth rate that followed government announcements of venture and innovation policies in the past, such as in 2017. Kim added, "This assumes a top-end scenario in which policy momentum and investor sentiment are maximized at the same time."
It also offered a positive outlook on supply-demand conditions. It said expanded tax benefits under the government's "Comprehensive measures to revitalize the KOSDAQ market" and groundwork for attracting institutional investors will supply market liquidity. ▲ Expanded tax benefits for KOSDAQ ventures ▲ New tax benefits for business development companies (BDC) ▲ Mandatory provision of venture capital by large investment banks (IB), among others.
Individual investor buying is also expected to increase. In fact, assets under management (AUM) of exchange-traded funds (ETF) tracking the KOSDAQ150 index have been growing rapidly, from 4 trillion won at the end of last year to 5.2 trillion won as of Jan. 26 this year.
Kim said, "At the initial stage of an index rise, we expect stocks among top market-cap names with high short interest ratios to show superior returns," adding, "Subsequently, as short positions are covered and BDC products are launched, demand will spread to small and mid-cap stocks with strong growth and technology."