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KOSPI pauses as Kosdaq surges on sector rotation
A screen at the dealing room of Hana Bank headquarters in Seoul shows the won-dollar exchange rate, KOSPI and Kosdaq, Thursday. The benchmark KOSPI fell 162.08 points, or 1.84 percent, to close at 8,639.41, while the Kosdaq rose 23.70 points, or 2.31 percent, to finish at 1,049.73. Yonhap
By Jun Ji-hye
KOSPI fell nearly 2 percent on Thursday amid renewed tensions in the Middle East, while the previously underperforming Kosdaq rallied more than 2 percent.
Investors appeared to rotate out of heavyweight KOSPI stocks and into smaller-cap names, with Kosdaq-listed machinery, equipment and manufacturing companies attracting much of the inflow, according to market analysts.
The benchmark KOSPI opened at 8,623.82, down 177.67 points, or 2.02 percent, from the previous close, and ended the session at 8,639.41, down 162.08 points, or 1.84 percent, snapping a four-session winning streak that began on May 28.
In the previous trading session on Tuesday, the index briefly surpassed the 8,900 mark for the first time on an intraday basis before closing in the 8,800 range.
The decline was attributed to overnight losses on Wall Street, where all three major U.S. indexes fell as hopes for a breakthrough in ceasefire talks between Washington and Tehran faded.
Growing geopolitical uncertainty pushed up both crude oil prices and government bond yields, prompting investors to reduce risk exposure. Reflecting those concerns, West Texas Intermediate crude futures rose 2.4 percent to settle at $96.02 per barrel.
In contrast, the secondary Kosdaq staged a strong recovery, opening at 1,032.91, up 6.88 points, or 0.67 percent, from the previous session, and extended its gains throughout the day to close at 1,049.73, up 23.70 points, or 2.31 percent.
The rally followed a steep five-session decline through Tuesday, during which the index tumbled 12.59 percent from 1,173.80 to 1,026.03.
Foreign and institutional investors were the main drivers of Thursday's advance, with machinery and equipment, telecommunications, chemicals and manufacturing stocks posting some of the strongest gains.
"The rebound was fueled by growing expectations that financial authorities could unveil measures to support the Kosdaq market, combined with robust performance in materials, parts and equipment-related stocks," said Kang Jin-hyuk, an analyst at Shinhan Securities.
Seo Sang-young, an analyst at Mirae Asset Securities, said investors are beginning to rotate into previously overlooked sectors, shifting funds away from the large-cap stocks that had led KOSPI's recent rally.
"In after-hours trading in the U.S., semiconductor and artificial intelligence-related stocks underperformed, while retail, pharmaceutical and biotech companies gained on expectations that tensions between the United States and Iran could ease. Taken together, these moves suggest that sector rotation is gathering pace," he said. "The same pattern can be seen in Korea, where Kosdaq, after suffering a sharp decline in recent weeks, is now significantly outperforming the broader market."
In the Seoul foreign exchange market, meanwhile, the won weakened against the U.S. dollar, opening at 1,530.0 per dollar, down 13.6 won from the previous session, and closing onshore trading at 1,529.7 per dollar, down 13.3 won.