[Good Morning Stock Market] KOSDAQ Outperforms KOSPI... Individual Market "Focus on Small and Mid-Cap Stocks"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] The domestic stock market is expected to start slightly lower, influenced by the mixed closing of the New York stock market.

◆ Relative Strength of KOSDAQ Compared to KOSPI = The New York stock market closed mixed on the 14th (local time) by index.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 53.62 points (0.16%) from the previous close to finish at 33,730.89. The Standard & Poor's (S&P) 500 index fell 16.93 points (0.41%) to 4,124.66, and the tech-heavy Nasdaq index dropped 138.26 points (0.99%) to close at 13,857.84.

Strong earnings from major banks such as JPMorgan and Goldman Sachs lifted the Dow Jones index. However, weakness in tech stocks pulled down the S&P 500 and Nasdaq indices.

The market focused on remarks by Jerome Powell, Chair of the Federal Reserve (Fed), and Coinbase's listing on Nasdaq.

Jerome Powell, Chair of the U.S. Federal Reserve (Fed), attended a conference hosted by the Washington Economic Club and said, "Virtual assets are merely speculative tools and are not actively used for actual payments," adding, "They are investment targets like gold."

Powell reiterated the Fed's stance of not recognizing cryptocurrencies as currency by emphasizing that "Bitcoin is not widely used as a means of payment."

On the same day, Coinbase, the largest cryptocurrency exchange in the U.S., was listed on the Nasdaq market. Coinbase's opening price was set at $381. Early in trading, it surged to $429, pushing its market capitalization to as high as $112 billion, but later fell to close at $328.28.

Seo Sang-young, a researcher at Mirae Asset Securities, said, "Considering that the semiconductor sector, as well as tech stocks that had recently been on the rise, led the weakness in the U.S. stock market, the KOSPI index is expected to decline and start slightly lower on the 15th," adding, "Foreign investors, who have been leading the market recently, may partially sell off, but buying demand may flow into small and mid-cap individual stocks such as IT parts and materials with expected earnings improvement, so the KOSDAQ index is expected to show relative strength."

◆ Kim Kwang-hyun, Researcher at Yuanta Securities = On the 13th, the KOSPI index closed at 3,169. It was the fifth time in history that the KOSPI index closed above 3,150 (on 1/8, 21, 25, 2/16, and 4/13). Although the index had often surpassed 3,150 intraday, it was difficult to close above that level. The index on the 13th was also the second-highest closing after January 25 (3,208.99).

On the 14th, the KOSPI index closed at 3,182.38, setting a new second-highest record. In April, the KOSPI index has risen on all but one of the 10 trading days, and since it last fell below 3,000 on March 24, it has risen on 12 of 15 trading days.

The KOSPI index has risen 4.0% in April. Considering the monthly returns of +3.6% in January, +1.2% in February, and +1.6% in March, the monthly return is also high. However, the stock market's reaction has been relatively lukewarm. Rather, more attention seems to be focused on the KOSDAQ index, which recovered above 1,000 for the first time since September 2000.

The reason for the reduced interest in the stock market appears to be low volatility. Unlike the frequent sharp rises and falls in January and February, volatility in March and April has significantly decreased. Although the index recorded a fairly high monthly gain, the daily gains were not large, so the impact was limited.

The volatility index (V-KOSPI) has fallen to its lowest level in the past year. Especially after the expiration on March 11, the decline has been notable, which is not unrelated to the slowdown in arbitrage trading by financial investors after the LP contract expiration. Unlike the high daily volatility in January and February, intraday volatility has also decreased.

The reason the stock market's reaction feels relatively lukewarm is also due to low trading activity. In April, the average daily trading value of the KOSPI was 14.6 trillion won, the lowest since November last year, and the lowest relative to market capitalization since March last year. Although 14.6 trillion won is not a small amount, trading feels sluggish compared to the past year.

Among market participants, attention should be paid to the changed flow of individual investors. Individuals net bought 47.5 trillion won last year and have continued to lead market demand with net purchases of 37.5 trillion won this year, but in April, they recorded a net sale of 200 billion won, showing a slowdown in buying demand. For reference, since January 2020, the only month with net selling by individuals was October 2020.

Foreign investors have net bought 2.4 trillion won in April. In terms of net buying amount, this is the second-highest since January 2019. Although foreign investors seem to fill the gap left by individuals in terms of net buying, their trading participation rate in April was 14.7%, indicating low market engagement, and half of their net buying was concentrated in just two stocks: Samsung Electronics (9.14 trillion won) and SK Hynix (3.37 trillion won), so this is not considered highly significant.

This content was produced with the assistance of AI translation services.