[MarketING] Unstoppable KOSDAQ, When Will It Be Time for Large-Cap Stocks?

KOSPI Rises for Four Consecutive Days, Recovers 2460 Level
KOSDAQ Surpasses 810 Level
Secondary Battery Stocks Strong, KOSDAQ Shows Favorable Relative Returns

[Image source=Yonhap News]

The KOSPI continued its strong performance for the fourth consecutive day, recovering the 2460 level. The KOSDAQ also rose for the second consecutive day, reaching the 810 level. Amid the adjustment phase, the KOSDAQ significantly outperformed the KOSPI, and if semiconductors revive, the strength is expected to shift to large-cap stocks.

KOSDAQ Recovers to 810 Level with Over 1% Gains for Two Consecutive Days

On the 6th, the KOSPI closed at 2462.62, up 30.55 points (1.26%) from the previous session. The KOSDAQ ended the day at 816.51, rising 14.09 points (1.76%).

While the KOSPI had shown limited gains until now, it surged significantly on this day to recover the 2460 level. The KOSDAQ posted gains exceeding 1% for two consecutive days, following its recovery above 800 on the 3rd, and climbed to the 810 level on this day.

Seokhwan Kim, a researcher at Mirae Asset Securities, explained, "Last week, the US stock market rose mainly in tech stocks due to hints of a 25bp (1bp=0.01 percentage point) rate hike in the monetary policy report, which led to falling interest rates and a weaker dollar, resulting in both the KOSPI and KOSDAQ closing with gains over 1%. The KOSPI's rise was led by internet and semiconductor stocks, while the KOSDAQ's increase was driven by strength in secondary battery stocks."

During the recent adjustment phase, the KOSDAQ recorded returns far exceeding those of the KOSPI. Over the past month, the KOSDAQ rose 7.25%, whereas the KOSPI increased by only 1%. The strong performance of secondary battery material stocks, which dominate the upper ranks of the KOSDAQ market capitalization, lifted the KOSDAQ. For example, EcoPro BM, the leading stock on the KOSDAQ, saw its share price rise by more than 80% over the past month. L&F, the second largest by market cap on the KOSDAQ, also rose 20%. EcoPro surged 111.7%. EcoPro BM rose more than 19% on this day alone, pushing its market capitalization past 20 trillion won, a sharp increase from 9.075 trillion won at the end of last year.

Donggil Noh, a researcher at Shinhan Investment Corp., said, "The improvement in the KOSDAQ's relative returns is due to the slowdown in foreign capital inflows and concerns over interest rate hikes, which limited the upside for large-cap stocks. The KOSDAQ, with a relatively higher weighting in secondary batteries and artificial intelligence (AI), has emerged as an alternative. Given the current economic and market conditions, an active strategy focusing on certain sectors rather than the entire KOSDAQ is advisable."

KOSPI Surges as Semiconductors Rally

Although the KOSPI had maintained a strong trend recently, its gains had been limited. However, on this day, semiconductors showed strength, leading to a significant rise.

Samsung Electronics rose 1.65%, regaining the 61,000 won level, and SK Hynix increased by 2.75%.

If semiconductors gradually recover, the strength is expected to shift to large-cap stocks. South Korea's exports in February fell 7.5% year-on-year. Breaking down exports into semiconductor and non-semiconductor categories, semiconductor exports decreased by 42.5%, marking the seventh consecutive month of decline, while non-semiconductor items increased by 0.8%, recovering from negative growth for the first time in five months. Seungyoung Park, a researcher at Hanwha Investment & Securities, said, "The domestic stock market will continue to rise slowly. The 12-month forward price-to-earnings ratio (PER) for the semiconductor sector exceeds 30 times, close to levels seen during the financial crisis, but the KOSPI PER excluding semiconductors is 10.5 times, which is average. If semiconductor exports turn to growth and earnings estimates improve, the KOSPI's upward momentum will strengthen."

Unless semiconductor exports worsen further, large-cap stocks are expected to outperform small- and mid-cap stocks. Park added, "February semiconductor exports recorded a decline of over 40% for the second consecutive month following January. Such a 40% decline has only occurred for four months from November 2008 to February 2009. If the situation does not deteriorate further, the likelihood of small- and mid-cap stocks outperforming the market is low. It seems more comfortable to focus on large, cyclical value stocks."

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