Kosdaq’s good times keep rolling
Korea’s secondary stock trading board, the Kosdaq, closed close to the 700 mark on Thursday for the first time in seven years, raising expectations about a rally reaching up to 750.The tech-heavy Kosdaq, which opened at 699.32, showed upbeat movement throughout the day but closed at 698.31, up 3.87 points from the previous day due to some sell-offs by foreigners.
The rally on the Kosdaq, partly helped by an upbeat atmosphere at the main Kospi, has both excited and concerned analysts about the further growth of the index.
The secondary market, home to riskier small-cap shares, has shown notable growth since early this year as many investors who were fed up with the Kospi’s sluggish performance turned to it, having become more aggressive in a time of the lowest-ever interest rates. The index surpassed 600 for the first time in February and kept the growth momentum for the next two months as foreign funds continued flowing into the Korean market amid high global liquidity.
Due to loosened monetary policies in advanced economies, global liquidity has grown significantly this year, sending major stock markets to higher levels.
Korea’s benchmark Kospi has jumped 10.7 percent since the beginning of the year, while the Kosdaq surged 27.9 percent, according to a report by KDB Daewoo Securities. During the same period, China’s Shanghai index soared 26.3 percent.
The Kosdaq’s rally can be attributable to increased investments in pharmaceutical and biotechnology shares. Those shares’ value jumped nearly 39 percent on average this year, the report said.
Analysts who are concerned about additional growth of the Kosdaq say the market is overheated already.
According to data by the Korea Financial Investment Association (Kofia) on Thursday, as much as 3.7 trillion won worth of investments were made as of Tuesday with money borrowed from financial institutions. In comparison, about 3.2 trillion won was borrowed for investments on the Kospi.
“Investors thirsty for high yields are targeting Kosdaq shares and taking out more loans to make aggressive investments,” said an official at Kofia.
But many are acknowledging that the Kosdaq would continue rising at least until May.
“The current highly liquid market is expected to persist for the time being, so there is not much worry about a sudden plunge on the Kosdaq,” said Chi Ki-ho, head of research at LIG Investment & Securities. The index could rise to between 735 to 750 by May, he said.
BY SONG SU-HYUN [song.suhyun@joongang.co.kr]
with the Korea JoongAng Daily
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