The Kosdaq market, once seen as South Korea’s hub for tech innovation, is underperforming despite its 30-year history. Consequently, investors and analysts are concerned as small-cap firms fail to deliver promised growth, while foreign interest continues to wane.
Since June, when the Kospi surged 56 percent, the tech-heavy Kosdaq market rose only 26 percent. Furthermore, it remains below 900 points, near levels from five years ago and under its 1,000 baseline set in 2004.
Meanwhile, the Kospi’s total capitalization topped 3,000 trillion won ($2 trillion) this year, increasing by 1,000 trillion won in five years. In contrast, the Kosdaq remains near 400 trillion won, barely growing over the same period.
Experts attribute the divergence to sector differences. The Kospi is boosted by semiconductor giants Samsung Electronics and SK hynix, which drove a 17 percent monthly gain in October. On the other hand, the Kosdaq is dominated by smaller biopharmaceutical firms and missed the global chip boom.
Structural issues further exacerbate the Kosdaq’s struggles. Listing standards are lenient, allowing loss-making companies under growth or technology exemptions. Additionally, delisting rules are soft, with fewer than 1 percent removed in five years compared to 2.5 percent on the Kospi. Analysts warn this creates “zombie companies” that fail to grow profitably.
In the first half of 2025, nearly 47 percent of Kosdaq-listed firms posted net losses, almost double the Kospi’s ratio. As a result, institutional investors remain hesitant, leaving retail traders to dominate the market.
Foreign investors have largely withdrawn. Between January and October, they sold 1.8 trillion won, while institutions offloaded 1.4 trillion won. Consequently, retail investors were the only net buyers, acquiring 6.2 trillion won. Analysts argue that foreign indifference reflects concerns over unworthy or overvalued listings.
Policymakers are now planning reforms. They will tighten listing and maintenance requirements, raising the minimum market capitalization from 4 billion won to 30 billion won by 2028. Moreover, programs like the National Growth Fund aim to invest 150 trillion won in high-tech sectors over five years.
Analysts and officials emphasize that supporting institutional participation and stable capital is critical. Therefore, experts hope these reforms, along with cyclical sector rotation, may help the Kosdaq market rebound in 2026.
