The KOSDAQ reclaimed the 900 level for the first time in three months, as expectations of improving earnings from expanded artificial intelligence investment spread beyond large-cap chipmakers on the main board to makers of semiconductor materials, parts and equipment. Analysts caution, however, that a sustained advance will require not only fund inflows but also stronger corporate earnings and a recovery of market trust through the delisting of troubled companies.
The KOSDAQ closed at 919.92 on the 6th, up 2.98%, or 26.63 points, from the previous session, according to the Korea Exchange (KRX). It was the first close above 900 since July 1 of this year, when the index finished at 929.35. The index rose in 11 of the past 13 trading sessions, gaining 14.02% over that period. Unlike the main board, where Samsung Electronics (005930.KS) and SK hynix (000660.KS) have been weak, the KOSDAQ's largest stocks — including chip material and equipment makers and biotech firms — advanced broadly, setting the market apart.
The main driver that lifted the KOSDAQ out of its status as the market's ugly duckling is a trickle-down effect spreading from large-cap chipmakers to materials, parts and equipment suppliers. From the first of last month through the 6th, SFA Semicon (036540.KQ) more than doubled, surging 100.17%, while Hanyang Digitech rose 79.51%, Doosan Tesna 53.06%, Hana Micron (067310.KQ) 51.07%, Nepes 42.83%, Nepes Ark 36.62% and LB Semicon 20.77%. The seven back-end process stocks gained an average of 54.86%. Expectations that rising demand for AI and high-bandwidth memory (HBM) will drive greater investment in back-end processes such as packaging and testing pushed the shares higher. In the KOSDAQ market capitalization rankings, Jusung Engineering (036930.KQ) climbed to second place on the 6th, with Wonik IPS (240810.KQ) at sixth, Simmtech seventh, EO Technics eighth and LEENO Industrial (058470.KQ) ninth — half of the top 10.
The rally is also notable for extending beyond a handful of themes into biotech and secondary batteries. EcoPro BM (247540.KQ) closed at 128,900 won, up 11.41%, after announcing it had signed a memorandum of understanding with Samsung SDI (006400.KS) to develop materials for all-solid-state batteries. Biotech stocks joined the advance as well, with HLB (028300.KQ) up 17.18% and Samchundang Pharm (000250.KQ) up 16.43%.
Supply and demand conditions are also improving. Foreign investors and institutions bought a net 111 billion won and 101.9 billion won of KOSDAQ shares, respectively, on the 6th, driving the index higher. Foreign investors, who sold a net 1.4733 trillion won last month, have turned to net purchases of 170.3 billion won this month. Average daily turnover has also risen quickly, climbing from 5.9868 trillion won in August to 7.0697 trillion won in September and 8.798 trillion won in October. Just three or four months ago, KOSDAQ turnover at times fell below that of 16 leveraged products tied to the single stocks of Samsung Electronics and SK hynix.
Market participants point to fund flows and earnings as the variables that will determine whether the KOSDAQ rally lasts. With the yield on the 10-year U.S. Treasury note above 5.3%, money is more likely to flow to stocks with confirmed profit growth than to those that are merely oversold or riding a theme. "While large-cap chipmakers such as Samsung Electronics and SK hynix are taking a breather, the KOSDAQ is seeing rotation centered on materials, parts and equipment stocks," said Kang Jin-hyuk, a senior researcher at Shinhan Securities (008670.KS). "With momentum in semiconductor capital spending continuing, the strength of related stocks stands out."
The KOSDAQ peaked at 1,226.18 on April 27 of this year and then declined for several months. For the recent gains to continue, analysts say, trust in the KOSDAQ itself must be restored, not just earnings at individual companies. The problem is that financial regulators' plans to overhaul the KOSDAQ have effectively returned to square one. Efforts to improve market quality by swiftly removing troubled companies — including delisting penny stocks and firms with market values below 20 billion won — were recently blocked by a court. A KRX official said follow-up measures would be prepared soon. A detailed plan for a KOSDAQ promotion-and-relegation segment system, scheduled for introduction next year, has yet to be disclosed, prompting expectations that it could be delayed repeatedly amid industry opposition.
"It is still too early to say the KOSDAQ market has improved structurally," said Baek Young-chan, head of the research center at Sangsangin Investment & Securities (001290.KS). "It has yet to benefit from shareholder return and capital market advancement policies, so we need to watch longer."
