Why Is KOSDAQ Still at the Bottom? "It Won't Rise Until This Is Fixed"

[Financial News] Analysts said KOSDAQ will need falling interest rates before it can stage a meaningful rebound. In a report released on the 27th, Dongchan Yeom, a researcher at Korea Investment & Securities Co., Ltd., said, "KOSDAQ's net profit over the past 12 months, based on the second quarter, is at its highest level since the fourth quarter of 2020, and its trailing price-to-earnings ratio is also at its lowest since December 2020." He added that it is "a level where buying can be considered."
However, Yeom noted that the recent rise in market interest rates is a burden, given KOSDAQ's high concentration of growth stocks.
He said that looking at the relationship between the yield on 3-year Korean Treasury bonds and KOSDAQ returns over the past 20 years, KOSDAQ generally performed well when rates were below 3%. He added that even when rates rose to the 3% to 4% range, KOSDAQ tended to strengthen during periods of falling rates.
He concluded that not only the absolute level of interest rates but also their direction matters for KOSDAQ. "For KOSDAQ to post a meaningful gain, a decline in the 3-year Korean Treasury bond yield, which is currently in the high 3% range, will be a necessary condition," he said. KOSDAQ closed the previous day at 826.87, down 0.03% from the prior session.
[email protected] Han Young-jun Reporter