Posted : 2018-01-12 16:41
Updated : 2018-01-12 20:09

Kosdaq narrowing gap with KOSPI

By Yoon Ja-young

The country's junior Kosdaq market is continuing to soar on a boom of bio shares and expectation on a government plan to boost the market. It is narrowing the gap with the main bourse KOSPI which has been remaining stagnant lately.

The tech-heavy Kosdaq closed at 873.05, Friday, up 2.41 percent from the previous day. A sidecar circuit breaker was activated around 1:57 p.m. on over a 6 percent rise of Kosdaq150 futures. It was the first circuit breaker since 2016 when it was activated twice. Kosdaq once recorded a 4 percent rise in the afternoon session, but somewhat stabilized toward the closure of the trading session.

The main index KOSPI, meanwhile, closed at 2,496.42, gaining 0.34 percent. The gap between the KOSPI and Kosdaq was 1,623.37, which compares with 1,860.7 points' gap marked on Nov. 1.

Back then, Kosdaq hovered below 700 while the main index continued a bullish move led by IT giants. That is when Samsung Electronics touched a record high 2.86 million won.

Since then, however, the junior market marked over 22 percent rise, while KOSPI fell over 2 percent. Samsung Electronics closed at 2.41 million won Friday, down 0.08 percent from the previous day. It has been sliding recently due to performances that fell below the market expectation. Analysts also cite strengthening Korean currency and possible oversupply of chips in the global market as negatives on the chipmaker.

Leading the junior Kosdaq market are pharmaceutical shares. Biosimilar developer Celltrion, which is top on Kosdaq in terms of the market cap, recorded a double digit rise Friday. Celltrion Pharm soared near 30 percent.

Some analysts say that the junior market is showing signs of overheating.

"Kosdaq rose around 15 percent due to massive purchasing by small investors and foreign investors following the ex-dividend. As a result, the Kosdaq150 index and Kosdaq pharmaceutical index are showing signs of short-term overheating," said Byun Joon-ho, a strategist at HMC Investment and Securities.

However, he said the investors would not let the index fall too far, citing the weak dollar, expectations on bio shares and launch of comprehensive benchmark indices as positives for the market.

The government unveiled plans to promote the Kosdaq market Thursday, on determination that the tech-loaded bourse should be empowered to support start-ups that would be new growth engines for the economy. It includes setting new benchmark index KRX300, establishing a 300 billion won Kosdaq scale-up fund, and exempting transaction tax on pension funds' investment on the junior market.

"The direction of the policy is noteworthy. The government is determined to boost the Kosdaq market," said Lee Kyung-min, a strategist at Daishin Securities.

"As the government policies and reforms that can affect the Kosdaq market, both directly and indirectly, get more shape, the market will draw more attention of investors."

He expected large shares with visibly good performance to lead the junior bourse.

Seo Bo-ick, an equity strategist at Eugene Investment and Securities, pointed to pension funds' investment as the positive factor.

"Purchase of shares by pension funds has had significant impact on movement of Kosdaq. As major pension funds will be induced to increase Kosdaq in their investment portfolio, it will work positively on the market," he said.

The government unveiled plans to launch new benchmarks incorporating Kosdaq to induce more investment by institutional investors. The KRX300 incorporating both KOSPI and Kosdaq will officially be launched by the Korea Exchange on Feb. 5. It will include 232 KOSPI shares and 68 shares of Kosdaq.

"The launch of KRX300 will be a trigger for the launch of related products, changing the portfolio of institutional investors on top of increasing Kosdaq investment by pension funds," he said. He said Kosdaq's small and medium sized shares may get more momentum compared with KOSPI's large shares.

Improving fundamental of Kosdaq listed firms is also positive sign. Kim Byung-hwan, an analyst at KB Securities, points out that the market consensus regarding net profit increase of Kosdaq was 38 percent while they expect 13 percent increase in case of KOSPI listed firms.

"Though the policy package would not have immediately visible changes in the market, they will definitely strengthen positive outlook on the 2018 Kosdaq," the analyst said.

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