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Kosdaq outlook

Kosdaq at 20-yr high, eyes opportune moment to emerge from bush league

Dec 18, 2020 (Gmt+09:00)


Twenty years ago today, South Korea’s tech-heavy Kosdaq was reeling from the bursting of the IT bubble, with the junior market’s benchmark index hovering around 990 points, down sharply from touching 2,834 just six months previous.

Korea's smaller bourse is now moving to stage a significant rebound, ready to surpass the psychologically important 1,000 level not seen in two decades.

The Kosdaq index closed at 944.04 on Thursday, its highest point since September 15, 2000. In early Friday trade, the key index advanced 0.05% to 944.51.

Back then, the IT boom was led by mobile carriers such as KT Freetel, dot-com firms and many other companies with “tech” in their name.

Top posts in the minor league are now taken by biopharmaceuticals, semiconductor materials, batteries and games, which have led the junior market’s rally throughout the year and are poised to rise further into next year.

“The rally for bios, 5G and battery companies has just begun. The growth potential differs from company to company, but in general, they are the ones that will lead the market upward,” said Lee Kyung-soo, head of research at Meritz Securities.

Q1 WATERSHED FOR 1,000 POINTS

KTB Investment & Securities analyst Kim Jae-yoon expects to see the Kosdaq market hit 1,000 points in the first quarter of 2021 at the earliest.

With the global COVID-19 pandemic, shares of diagnostic reagent makers and biopharmaceuticals that manufacture anti-virus products soared until recently, prompting some investors to take profit from decent gains.

Celltrion Healthcare, the distribution unit of biosimilar maker Celltrion Inc., posted one of its best third quarters ever, boosting its stock to the Kosdaq’s top place with a market cap of over 24 trillion won ($22 billion) as of Thursday, higher than some of its peers on the main Kospi market.

Celltrion Pharm Inc., the biosimilar product making unit, rose to second place with 8.38 trillion won in market cap.


With some profit-taking in bio shares, investors are now looking to batteries, materials and 5G stocks such as SK Materials and SoulBrain.

Korea’s stock markets, both the Kospi and the Kosdaq, are being driven by ample liquidity on the back of the government’s fiscal stimulus measures amid ultra-low interest rates.

Earlier this month, global investment firm J.P. Morgan projected that Korea’s benchmark Kospi will climb to 3,200 next year, alongside domestic brokerage firms that have already set their Kospi targets above 3,000.

PESSIMISTS FEAR CORRECTION

Some analysts, however, say that the Korean stock markets, the junior Kosdaq in particular, may face a correction early next year.

“Foreign investors, key players in the Korean market, are more interested in the premier league. There seems to be no doubt about the Kosdaq hitting the 1,000 mark, but it may not grow as strongly as the US Nasdaq,” said Cho Yong-joon, senior managing director at Hana Financial Investment.

“Given that foreign funds mostly flow into the Kospi market, the Kosdaq’s gains have certain limitations.”

Write to Jae-Won Park at wonderful@hankyung.com

In-Soo Nam edited this article.

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