Individual funds are flocking to the KOSDAQ market, which usually has greater volatility. As geopolitical risk in the Middle East stemming from the war with Iran drags on, money is temporarily seeking refuge in the KOSDAQ market, which is relatively less affected by the conflict.
On the 14th, according to the Korea Exchange (KRX), the share (daily average) of KOSPI transaction value by individual investors fell from 48.11% in January to 42.41% in March and 42.27% in April (daily average for the 1st–13th), while KOSDAQ rose from 65.52% to 67.54% over the same period. This indicates that some individual funds are moving from the stock market to the KOSDAQ market.
This movement of funds shows that investors value sensitivity to the "war variable," rather than simple volatility. KOSPI has a high weight of large export stocks such as semiconductors and automobiles, making it directly exposed to external variables like international oil prices, exchange rates and the global economy.
By contrast, KOSDAQ is driven by a market of bio and growth stocks, which tend to move more on individual corporate issues or growth expectations than on external variables like war. In the end, investors are choosing a market that is relatively less affected by the war variable, even if volatility is high.
Heo Jae-hwan, a researcher at Eugene Investment & Securities, said, "Sectors such as bio and secondary batteries, which have a high weight in the KOSDAQ market, are relatively less exposed to external variables."
Heo also said, "When international oil prices rise and inflation pressure increases, it is difficult for large companies listed on the stock market to pass rising expenses on to prices, but because the KOSDAQ market has a high share of supply chain corporations such as secondary battery materials and equipment, it has more room to raise prices than KOSPI large caps focused on finished products, so it can play a positive role during geopolitical risk."
During the Russia-Ukraine war as well, the stock market swung and individual funds flowed out of the stock market, but inflows continued in the KOSDAQ market.
In fact, in March 2022, at the start of the war, the share of KOSPI transaction value by individual investors was 56.47%, but as the war dragged on, it gradually fell to 54.78% in May and 48.27% in June. In contrast, the KOSDAQ market showed a steady trend, from 83.26% in March to 83.14% in May and 82.74% in June.
However, some note that this movement of funds does not necessarily mean the KOSDAQ market is stable. While sector characteristics may imply lower sensitivity to the war variable, this should be viewed separately from the high volatility inherent in the KOSDAQ market.
Heo said, "We are positive on the outlook for the KOSDAQ market itself, including potential policy benefits," but added, "Pharmaceutical and bio corporations on KOSDAQ have large individual issues, so volatility itself is inevitably high."
Meanwhile, the impact of war-related news on the stock market has recently been diminishing. Right after the war broke out in March, the KOSPI index plunged 5% to 7% in a single day and then rebounded, showing sharp volatility, but this month the swings have narrowed somewhat.
As war-related news persists, investors appear to be shifting from overreacting to simple events to responding more to factors that actually affect corporate earnings and the economy, such as rising oil prices or supply chain disruptions.
Lee Sang-yeon, a researcher at Shinyoung Securities, said, "With the entry into a protracted war phase, the volatility of the asset market itself has likely already passed its peak," adding, "In phases dominated by external variables like geopolitical risk, earnings visibility and the credibility of fundamentals tend to matter more."