Safer-than-Expected December KOSDAQ Strategy... Continued Preference for Large-Cap Stocks

[Asia Economy Reporter Lee Seon-ae] It is forecasted that the KOSDAQ in December will show a relatively safe trend centered on large-cap stocks.

According to KB Securities on the 21st, the most notable issue in the KOSDAQ market in December is the 'introduction of a new index.' This is expected to act as a trigger for capital inflow. KB Securities researcher Ha In-hwan explained, "We need to watch for the possibility of capital inflow after the introduction of the new index, and purchases by pension funds and investment trusts can be expected," adding, "The introduction of the new index likely means it will be composed mainly of large-cap stocks within the KOSDAQ."

Attention should also be paid to the start of the 'regulation on convertible bond issuance (refixing regulation)' from December 1. It is important to note that this regulation was first mentioned in government announcements back in October 2020, as 'pre-demand' to issue bonds before the regulation was confirmed from that time. This means that from the time the regulation is implemented, the risk associated with convertible bonds will be alleviated.

Researcher Ha said, "We focus on the risk resolution in the bio and IT sectors, which account for most convertible bond issuances, and prefer large-cap stocks with less financing risk." He added, "Although there is also the major shareholder taxation issue, the already known risks (Known Knowns) are expected to pass without major shocks, so we prefer 'large-cap stocks' that are less affected by individual selling, while paying attention to a rebound in 'small-cap stocks' at the beginning of the year."

Foreign investors are net sellers in the KOSPI but net buyers in the KOSDAQ, especially focusing on large-cap stocks. Until macro headwinds (strong dollar, China risks, memory semiconductors) are resolved, from the foreign investors' perspective, the KOSDAQ is considered a relatively better option than the KOSPI.

As a sector strategy for the KOSDAQ, continuous interest in content companies is advised. Following November, the focus in December remains on the intensifying competition among OTT platform operators, with the beneficiaries being 'content producers.' Two types of benefits are expected: the potential for reflexive benefits due to intensified competition (such as commission reductions) and an opportunity for increased investment in K-content. Researcher Ha emphasized, "Studio Dragon is a representative example, and attention should also be paid to small and mid-cap stocks," adding, "We should also focus on sectors that are hard to die out as leaders (electric vehicles, gaming) and the potential rebound of previously neglected sectors (pharmaceuticals/bio, semiconductors/electronics)."

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