"KOSDAQ Set to Rise in August... Focus on High-Quality Stocks with Steep Declines" [Weekend Money]

Intensified Supply-Demand Vacuum Amid KOSPI Concentration and Retail Investor Exodus

"Expectations for Single-Stock Leverage Regulations and Policy Momentum"

"Focus on High-Quality Growth Stocks with Solid Earnings Projections and Oversold Declines"

There are projections that the KOSDAQ market, which has been sidelined compared to the KOSPI in terms of investor interest, will seize a turning point starting in August. Analysts believe that the excessive concentration of funds in large-cap stocks has largely come to an end, and that government policy initiatives will provide critical support for the shift.

Retail Investors Exit and Leverage ETF Frenzy... KOSDAQ Caught in 'Supply-Demand Vacuum'

On the 28th of last month, the exchange rate, KOSPI, and KOSDAQ indices were displayed on the index status board in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. Photo by Dongjoo Yoon

According to Yuanta Securities on August 1, researcher Lee Jaewon recently stated: "There has been an extreme disparity in returns between the KOSPI and the KOSDAQ since the beginning of the year, and during market corrections, both indices have declined concurrently. In this context, leverage regulations and policy momentum are expected to serve as catalysts to normalize the KOSDAQ's excessive declines in the future."

The primary reason for the KOSDAQ's underperformance has been the departure of retail investors, who traditionally provided market liquidity. In addition, since the launch of single-stock leveraged Exchange Traded Funds (ETFs) at the end of May, the KOSDAQ has been stuck in a supply-demand vacuum, leading to a decline in stock prices beyond what can be justified by fundamental changes in individual companies.

However, regulation on single-stock leveraged products, implemented at the end of July, is expected to serve as a turning point for KOSDAQ. Researcher Lee explained, "As the capital efficiency and accessibility of large-cap semiconductor leveraged products decrease, the relative investment attractiveness of small- and mid-cap growth stocks increases."

The government's policy to strengthen the fundamentals of the KOSDAQ market is also taking concrete shape. Researcher Lee pointed out, "In addition to including KOSDAQ in the National Pension Service's benchmark, the new KOSDAQ fund within the National Growth Fund, and the launch of BDCs (Business Development Companies), the 'KOSDAQ Premium Index' is scheduled to be released in September."

Solid Earnings but Falling Stock Prices... Spotlight on EPS Upgrades

In particular, he sees a rebound opportunity centered on small and mid-cap companies with technological prowess and strong earnings growth potential. Companies such as Alteogen, Seojin System, Padu, Simmtech, Jusung Engineering, Techwing, and LIG ChemBio—expected to make significant contributions to KOSDAQ earnings growth in 2027 and 2028 and to receive earnings upgrades—are key names to watch.

However, as volatility remains high for individual stocks in sectors such as biotech, secondary batteries, and robotics, investors should focus on selective stock picking rather than anticipating indiscriminate index gains.

Researcher Lee added, "I'm not calling for a full-fledged KOSDAQ boom, but even just a further easing of supply-demand imbalances and a recovery in valuation attractiveness could drive a normalization of the overdone decline toward the 120-day moving average. It is an opportune time to scale up exposure to high-quality KOSDAQ growth stocks that simultaneously satisfy the three conditions of excessive decline, EPS upgrades, and policy-driven supply-demand enhancements."

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