Korea Exchange Chairman Jeong Eun-bo delivers opening remarks at a ceremony marking the 30th anniversary of the Kosdaq market, held at Conrad Hotel in Seoul on July 1. [Korea Exchange]
Korea Exchange Chairman Jeong Eun-bo delivers opening remarks at a ceremony marking the 30th anniversary of the Kosdaq market, held at Conrad Hotel in Seoul on July 1. [Korea Exchange]

Financial authorities are moving to revamp Kosdaq's delisting regime and introduce a promotion-relegation system to reinvigorate the market, but the brokerage community says structural reforms alone are unlikely to produce a sustained rebound. While investor sentiment has recently picked up, led by biotech and robot stocks, analysts say a durable uptrend requires growth expectations, liquidity and policy support to align simultaneously — as they did during past bull runs.

Kosdaq closed Tuesday at 780.72, up 43.37 points, or 5.88 percent, from the previous session, according to Korea Exchange. The index has now risen for three consecutive trading days, accumulating a gain of roughly 21 percent over that stretch. After sliding to a year-to-date low of 644.78 intraday on Thursday, the index staged a sharp recovery, triggering a buy-side sidecar for the third straight trading day — a first in history — at 10:47 a.m. Tuesday.

The Kospi also closed higher, gaining 101.50 points, or 1.62 percent, to finish at 6,358.95, despite briefly dipping to 6,080.25 intraday as Samsung Electronics and SK Hynix turned negative. A late surge in retail buying concentrated in semiconductor shares helped the benchmark recover into the close.

Biotech and robot stocks have been driving the Kosdaq rebound. Peptron, which hit the daily upper limit Monday, rose more than 4 percent again Tuesday, while PharmaResearch, LigaChem Biosciences and HLB also posted gains. Buying interest extended to robot names including Yuilrobotics and Clobot. Monday had seen profit-taking in Samsung Electronics and SK Hynix weigh heavily on the Kospi, while Kosdaq held firm enough to trigger an intraday buy-side sidecar.

Lee Jae-won, a researcher at Yuanta Securities Korea, said the implementation last week of regulations on single-stock leveraged ETFs had begun to produce the anticipated "trickle-down effect from easing concentration in large-cap semiconductors toward small- and mid-cap growth stocks." He described the current dynamic as "a supply-demand realignment in which capital leaving semiconductors is rotating into pharmaceuticals, biotech and robotics, spreading warmth across the broader market."

Even so, brokerages are not yet ready to call this a trend reversal for Kosdaq. Daishin Securities pointed to four episodes since 2010 in which Kosdaq outperformed the Kospi: the biotech technology-export boom of 2015, the Kosdaq venture fund era of 2017–2018, the diagnostic-kit rally of 2020 and the secondary-battery run of 2023. In each case, the index's relative strength emerged when expectations for a growth industry, fresh liquidity and policy support converged at the same time.

"Past Kosdaq bull markets arose when growth expectations, liquidity and policy hopes formed together, and gains tended to concentrate in a small number of stocks rather than the broader market," said Kwon Sun-ho, a researcher at Daishin Securities. "During the 2023 secondary-battery rally, the top three stocks accounted for 79 percent of the total return among the top 150 names by market capitalization."

Even when a leading growth stock emerges, a rally is hard to sustain without sufficient follow-on capital. Passive funds tracking the Kosdaq 150 currently stand at roughly 8.7 trillion won ($6.08 billion), just 14 percent of the assets tracking the KOSPI 200, according to Daishin Securities. Recent flows of retail money into large-cap semiconductor stocks and single-stock leveraged ETFs have further weakened Kosdaq's supply-demand dynamics, analysts said.

Against that backdrop, the promotion-relegation system, premium index and linked ETFs being pursued by financial authorities are drawing attention as potential tools to shore up Kosdaq liquidity. Under a promotion-relegation framework, the investable universe would be narrowed from the existing Kosdaq 150 to roughly 70 names, concentrating supply-demand flows in individual stocks. Daishin Securities estimated that an inflow of 1 trillion won into the 50 promotion-relegation candidate stocks would generate a new buying effect equivalent to roughly 1.5 percent of their combined float market capitalization.

Analysts also caution that while structural reforms such as the promotion-relegation system may deliver short-term supply-demand improvements, securing long-term investment demand is a separate challenge. The Kosdaq Global Segment offers a cautionary example: despite outperforming both the Kosdaq and the Kosdaq 150, the segment attracted only 30.6 billion won in tracking assets, and its performance this year has trailed not only Kospi semiconductor stocks but also the broader Kospi excluding semiconductors. The gap between the growth stocks the market craves and the blue-chip companies policy selects means short-term regulatory effects and long-term investment demand need to be assessed separately, analysts said.

"The promotion-relegation system is less a short-term index-boosting measure and more a long-term structural reform aimed at separating quality companies from weak ones," Kwon said. "A structural rise in Kosdaq will only be possible when growth expectations, fresh liquidity and policy effects come together at the same time."


hajun825@heraldcorp.com