[MarketING] KOSDAQ Recovers to 900 Level After 11 Months

KOSPI Rises for 6th Day, Reaches 2570 Level
KOSDAQ Recovers 900 Level with Two Consecutive Gains

The KOSPI continued its upward trend for the sixth consecutive trading day, recovering the 2570 level, while the KOSDAQ rose for the second consecutive day, reclaiming the 900 level. It is the first time in 10 months that the KOSPI has closed above 2570, and the first time in 11 months that the KOSDAQ has risen above 900. As the domestic stock market has entered a technically significant zone, attention is expected to focus on factors that could influence the market.

KOSPI recovers 2570 level... KOSDAQ reclaims 900 level

On the 14th, the KOSPI closed at 2571.49, up 9.83 points (0.38%) from the previous day. The KOSDAQ ended the day at 903.84, up 9.59 points (1.07%). The KOSPI closing above 2570 is the first since June 10 last year (2595.87). The KOSDAQ rose above 900 for the first time in about 11 months since May 4 last year (900.06).

[Image source=Yonhap News]

Foreign investors and institutions led the upward momentum. On that day, foreign investors net bought 187.1 billion KRW in the KOSPI market and 7.6 billion KRW in the KOSDAQ market. Institutions purchased 240.5 billion KRW and 83.4 billion KRW respectively. Individual investors sold 410.8 billion KRW and 77.2 billion KRW respectively.

The decline in the won-dollar exchange rate has continuously attracted foreign buying. Over the past week, foreign investors have shown buying pressure in the KOSPI market every day except one. In the KOSDAQ market, they have net bought for three consecutive days. On that day, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1298.9 won, down 11.5 won from the previous day. It is the first time in about half a month since March 30 (1299.0 won) that the closing exchange rate fell below 1300 won.

Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "With the easing of U.S. inflation concerns and the recovery of risk appetite, the KOSPI recovered the 2570 level and the KOSDAQ the 900 level. In addition to the authorities' exchange rate stabilization measures the previous day, the decline in U.S. inflation indicators and the yuan's strength due to favorable Chinese export data contributed to the won-dollar exchange rate falling below 1300 won."

As the domestic stock market has entered a technically significant zone, attention is expected to focus on whether technical resistance will be broken by next week. Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "Both the KOSPI and KOSDAQ have entered technically significant zones as they are at the retracement levels of the bear market declines. For the KOSPI, the 38.2% retracement level from the 2021 high to the 2022 low is 2595 points, and for the KOSDAQ, the 61.8% retracement level is 904 points."

Whether resistance is broken depends on semiconductors, according to the researcher. Choi said, "The recovery of investor sentiment, lower interest rates, and inflows of funds into the stock market are favorable. While secondary battery stocks are taking a breather, whether the index breaks resistance depends on semiconductors. The tug-of-war between China's slow recovery and concerns about a U.S. recession, as well as expectations for a recovery in the semiconductor industry, will determine whether resistance is broken."

KOSDAQ continues rally, a period of change in leading stocks

Since 2015, the KOSDAQ has experienced four rallies. Amid the ongoing rally since the beginning of this year, the current period is one where the leading secondary battery stocks are taking a break, and whether there will be a change in leading stocks is expected to influence the direction of the index.

As profit-taking pressure on the overwhelmingly strong secondary battery stocks since February increases, signs of change are appearing in the KOSDAQ rally. Researcher Choi said, "If secondary battery stocks fall in the KOSDAQ, there is an 18.3 percentage point gap in returns compared to the beginning of the year, and prices remain at February levels. Recently, the concentration of demand has eased, and many sectors are rebounding." Given the increased weighting of secondary battery stocks, their correction is expected to inevitably impact the index. Choi added, "If the rise in secondary battery stocks since early this year is retraced to a technically significant point, assuming no changes in other sectors, the KOSDAQ would be calculated at 830 to 870 points, representing a 4-8% correction."

The future direction of the KOSDAQ is considered to depend more on the price movements of sectors excluding secondary batteries. Choi said, "The inflow of demand into healthcare, which constitutes a large portion, positively affects the index. Similar to the KOSPI, the IT sector can influence the index direction, and interest in media and entertainment, which have highlighted earnings growth after recent price corrections, remains valid."

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