Retail investors are flooding into exchange-traded funds (ETFs) tracking the KOSDAQ 150 index amid growing expectations that the KOSDAQ index could reach 3,000 following the KOSPI's push toward 5,000. The explosive capital inflows into ETFs are pushing individual stocks higher, with gains heavily concentrated in KOSDAQ 150 constituents.
According to Korea Exchange, the KODEX KOSDAQ 150 ETF attracted the largest net purchases from domestic retail investors over the four trading days since the KOSDAQ first reached 1,000 on January 26, totaling 2.26 trillion won ($1.7 billion). On January 28 alone, 616.5 billion won flowed into the fund, breaking the all-time single-day net purchase record for any ETF just two days after the previous high was set.
Other KOSDAQ 150-based products including KODEX KOSDAQ 150 Leverage, TIGER KOSDAQ 150, TIGER KOSDAQ 150 Leverage, and ACE KOSDAQ 150 all ranked among the top 10 ETFs by net retail purchases. The concentrated investment in KOSDAQ has pushed the index up 25.8% year-to-date, quickly catching up to the KOSPI's 23.9% gain.
With the KOSDAQ comprising numerous stocks and higher volatility, investors are actively utilizing KOSDAQ 150 ETFs to gain concentrated exposure to quality names rather than picking individual stocks. The KOSDAQ lists 1,822 companies, more than double the 951 on the main KOSPI market, yet its total market capitalization of 638 trillion won is comparable to SK hynix (000660.KS) alone at 627 trillion won.
The concern is that given the KOSDAQ's relatively small market size, ETFs are effectively lifting the entire market. Rather than ETF prices rising because individual stocks appreciate, stocks are being pushed up by spot demand generated from ETF purchases. When retail investors buy ETFs, liquidity providers hedge by purchasing underlying stocks in the market. This explains the recent surge in net buying by financial investment firms, a key institutional player in the KOSDAQ.
As a result, the gap between KOSDAQ 150 constituents and non-constituents has widened sharply. While the KOSDAQ 150 index surged 26.48% over the four trading days from January 26 to 29, the remaining approximately 1,670 stocks not included in the index averaged gains of just 4.11%. Some 24.2% of all listed companies (405 firms) actually declined after the index crossed the 1,000 milestone.
Heightened volatility has also intensified competition among top stocks by market capitalization. Ecopro BM (7.42%) and Ecopro (2.02%) overtook Alteogen to claim the first and second spots in market cap for the first time in one year and four months. Rainbow Robotics (9.35%) also surpassed ABL Bio (1.66%) to rise to fourth place.
"The KOSDAQ is a market heavily influenced by policy, and expectations are driving massive capital inflows," an industry official said. "For retail investors, ETFs are really the only way to invest in quality stocks."
