KOSDAQ breaches 760 on institutional buying

By Park Hyong-ki

The tech-heavy KOSDAQ is having a field day, rallying for six straight trading days on retail, institutional and foreign buying.

While the benchmark KOSPI is facing some corrections, the tech index has been reaching record highs in the last couple of days.

The KOSDAQ closed at 768.03 points Wednesday, up 1.53 percent or 11.57 points. Its intraday record was 773.05, surpassing 770 for the first time since July 2015.

Institutional investors, particularly pension funds, have turned bullish toward mid- and small-cap stocks as the incumbent government has expressed its commitment to fully support small- and medium-size enterprises (SME).

“Investors are taking the state support positively,” said Kim Dae-jun, an analyst at Korea Investment & Securities.

A lot of money will be poured into fostering SMEs, including startups, through state funds to help them develop their very own sustainable ecosystems to create new industries and jobs.

Exactly 30 trillion won will be raised and spent to develop a new breed of tech-centric enterprises that can potentially thrive in the age of the Fourth Industrial Revolution.

The government also wants those companies to have a chance to secure extra funds through initial public offerings on indices smaller than the KOSPI.

The National Pension Service (NPS) will continue to play a large role in this endeavor.

Already, the state-run pension fund invested 100 billion won in KOSDAQ stocks over the last five trading days.

With the key rate expected to rise in the near future, which will weigh on the value of bonds, patterns show investors moving from fixed-income securities to equities.

Institutional investors’ net purchase of the stocks reached a record of more than 300 billion won in a single day on November 14, according to the Korea Exchange (KRX).

The KOSDAQ has generally been an investment ground for retail investors.

Their money in the stocks accounted for nearly 90 percent of the total. The rest belonged to institutional investors, but mostly played the game of short selling. This resulted in higher volatility and retail losses.

Now, analysts say things are about to change.

KB Securities forecast the tech index can breach 1,000 next year. This was once an unthinkable number for the little exchange.

Analysts say all hands are on deck for the KOSDAQ to further gain momentum as the policy for SMEs, positive earnings outlooks and increasing investors’ appetite are simultaneously driving up the sentiment.

“The rally is expected to be led by the IT and healthcare sectors. The KOSDAQ has more of these companies than the KOSPI,” said Kim Young-hwan, an analyst at KB Securities.