The KOSDAQ surged more than 4% to its highest level in three months, breaking out of a slump that followed a sharp decline between May and July. Easing risk aversion lifted individual semiconductor materials, parts and equipment stocks, while a government plan to expand research coverage of small- and mid-cap companies also helped draw investor attention, analysts said.
The KOSDAQ closed at 894.29 on the 1st, up 38.38 points, or 4.48%, from the previous session, according to the Korea Exchange. That marks the highest close since the index finished at 929.35 on July 1. The index has risen in 10 of the past 11 sessions since Sept. 15, with the only decline coming on the 22nd, when it slipped 0.23%. Over that stretch it gained 10.8%, and it has advanced for five straight sessions since Sept. 28.
The rally stands out against the KOSPI, which closed at 6,971.35, up 133.31 points, or 1.95%. The benchmark index rose just 4.3% over the same 11 sessions.
Chip supply-chain stocks led the advance. Wonik IPS (240810) rose 9.13%, EO Technics (039030) 8.46%, LEENO Industrial (058470) 10.90%, Simmtech 6.25% and HPSP (403870) 8.32% — the five companies ranked sixth through 10th by market value on the KOSDAQ. Alteogen (196170) and EcoPro (086520), the market's two largest companies by market capitalization, gained 4.13% and 5.58%, respectively.
Market watchers noted that individual KOSDAQ names posted far larger gains while the KOSPI's advance was limited. Appetite for riskier assets recovered somewhat after South Korea's exports hit a record monthly high in September on strong semiconductor demand and Micron reported better-than-expected results, they said.
"The KOSDAQ is highly vulnerable to risk aversion, and Micron's solid earnings appear to have created a sense that the market will find its footing," said Lee Jin-woo, head of the research center at Meritz Securities. "Rather than steep downside risk, it seems better to look at the upside."
The government's measures to expand research coverage of small- and mid-cap stocks, announced the same day, also supported sentiment. Under the Financial Services Commission plan, the country's nine comprehensive financial investment business operators must devote at least 25% of their annual research reports to companies ranked below 300th by market value on the KOSPI and below 150th on the KOSDAQ. Half of those reports must cover KOSDAQ names.
The FSC also plans to factor small- and mid-cap research plans into reviews for designating comprehensive investment firms and approving the issuance of short-term notes. Disclosure requirements for newly listed companies have been tightened to at least two reports a year for three years, from at least two reports over one year.
The commission will also change how brokerages evaluate analysts, requiring the use of objective measures such as the gap between target prices and actual share prices. Brokerages must periodically disclose their top five analysts with the smallest such gaps.
Several measures were also drawn up to strengthen analyst independence. Analysts will be allowed to withhold their names when publishing reports with sell recommendations. The FSC also plans to create rules governing analysts' support for sales divisions, to prevent reports from being used for business purposes.
"The KOSDAQ has long been overlooked compared with the KOSPI, and the government's policy showed a commitment to revitalizing the market," said Lee Young-gon, head of the research center at Toss Securities. "Chip materials, parts and equipment stocks have become more attractively priced since the July correction, and investors should focus on individual companies whose earnings are improving."
