[Teheran-ro] What It Will Take for KOSDAQ 3000

"To move on from the KOSPI 5,000 level to the KOSDAQ 3,000 mark, the most important thing is ultimately to normalize the fundamentals of KOSDAQ-listed companies and win back the trust of institutions and investors."
Since the beginning of the year, the domestic stock market has been hitting record highs day after day, and the need to strengthen and normalize the KOSDAQ market, relative to the KOSPI, has emerged as a hot issue.
Buoyed by the Lee Jae-myung administration’s stock market support measures, the KOSPI has been on a relentless rally since last year. On top of that, signs of a rebound in the K-manufacturing sector have become clearer, and with strong performances by semiconductor blue chips Samsung Electronics and SK hynix, the index has already passed the 5,000 level and is now eyeing 6,000.
However, even though the KOSDAQ recently broke through the 1,000 level, many analysts say the market still has a long and difficult road ahead if it is to reach the 3,000 target set by the Lee Jae-myung administration.
Against this backdrop, the "delisting reform plan for the swift and strict removal of insolvent companies" that the financial authorities abruptly unveiled on the 12th deserves praise as a starting point for improving the fundamentals of the KOSDAQ market. Beginning this July, companies with a market capitalization below 20 billion won will be subject to delisting, and from next year the threshold will rise to 30 billion won.
In effect, it is a corrective measure aimed at the qualitative development of the KOSDAQ market, whose size has expanded rapidly through the Technology Exception Listing (TEL) system and similar schemes. The plan clearly signals an intention to sweep out so-called penny stocks with low share prices and tiny market caps, and to steer the market toward higher-quality growth.
At present, the market capitalization of SK hynix, the KOSPI’s flagship stock, stands at 642 trillion won, while the entire KOSDAQ market is worth only 606 trillion won.
The average price-earnings ratio (PER) of the KOSDAQ market is about 117 times, more than three times higher than SK hynix’s 30.7 times.
Marking its 30th anniversary this year, the KOSDAQ market has also come under fire for becoming a breeding ground for overvaluation, as loss-making biotech firms have gone public in recent years through the TEL system.
A market expert pointed out, "In the end, the Technology Exception Listing system, which allowed companies to list based solely on their technology, has boomeranged into a trigger for valuation corrections among KOSDAQ firms," adding, "In particular, a series of sell-offs in unprofitable biotech stocks has fueled disorder and bubbles in the KOSDAQ market."
If listing requirements are tightened and exits are made smoother to restore the health of a KOSDAQ market that has expanded too rapidly in quantitative terms, the springtime of KOSDAQ 3,000 may come much closer. If the overall KOSDAQ market becomes more sound and institutions feel safe to invest, this year could also mark a qualitative step up for the Korean capital market as a whole.
kakim@fnnews.com Reporter