Tech index remains in KOSPI shadows
By Park Hyong-ki
The tech-heavy KOSDAQ marks its 21st anniversary in July. But the index does not seem to be in a celebratory mood.
Its market cap has grown 28 times since the index was started in 1996, modeled on the NASDAQ in the U.S.
The number of listed companies on the KOSDAQ is 1,228, up from 330 in 1996.
It is not even comparable to the NASDAQ, which has global tech heavyweights including Facebook, Amazon and Microsoft.
The KOSDAQ has very few noticeable tech brands that can stand out with those global IT players.
When they became bigger, those that had the potential to be the index’s representative stocks took the chance to exit the KOSDAQ and relist on the KOSPI.
Naver, Korea’s biggest search portal, NCSoft, the country’s second-biggest game developer, Hana Tour, a leading travel agency, and Asiana Airlines, one of the nation’s flagship carriers, relocated to the KOSPI over the past decade.
Now, Kakao, which merged with Daum search portal and is highly regarded for its mobile messenger, is preparing to relist on the KOSPI, possibly by September.
Kakao could even make the KOSPI 200, which tracks the KOSPI’s 200 liquid stocks, including Samsung Electronics.
The reasons for relocating to the KOSPI vary ― The companies wanted to be valued fairly, the KOSDAQ was too volatile, listing on the KOSPI would help boost their brands.
The KOSPI relisting did help their shares perform better, with their fundamentals reflecting earnings rather than being swayed by the KOSDAQ’s volatility.
It is no secret that the KOSDAQ has been more vulnerable to market downswings than the KOSPI has.
The gap between the two indices has further widened, with the KOSDAQ always in the KOSPI’s shadows.
This is in part because Korea has relied on exports driven by family-run conglomerates.
Unlike the NASDAQ, which is viewed as equally as the S&P 500 or the Dow Jones Industrial Average, the KOSDAQ has never been perceived on a similar level as the KOSPI.
“Given that most of the conglomerates are listed on the KOSPI, the tech-heavy index is seen only as a ‘junior’ exchange for small companies,” said an industry source, who asked not to be named. “There aren’t even many analysts covering the KOSDAQ companies.”
In comparison, those listed on the NASDAQ such as Amazon, Facebook, Apple and Google were startups that began in garages or college dormitories, and became big and listed on the index, he noted.
The KOSDAQ has climbed about 6 percent on average since January this year. The KOSPI has jumped 18 percent during the same period.
The inequality has also burdened the KOSPI, because it relies heavily on chaebol stocks for growth, especially Samsung Electronics.
Analysts have been pointing out that without Samsung Electronics, the KOSPI would not rally as much. The company accounts for more than 20 percent of the KOSPI market cap.