Tech-heavy KOSDAQ market rallies along with KOSPI

Along with the bullish benchmark stock index KOSPI’s record run early in the New Year, the tech-heavy KOSDAQ is also rallying and nearing the 530 mark.

The KOSDAQ rose 3.83 points or 0.73 percent to close at 527.64 Thursday. Though growth slowed, the index continued to rise unlike the KOSPI, whose growth streak stopped at two days after having reached record highs.

On the back of 51.4 billion won (46 million U.S. dollars) in purchases by foreign investors, the KOSDAQ saw net purchases for the eighth consecutive day.

The KOSPI has topped its previous record set in 2007, but the KOSDAQ is 37 percent short of its highest mark of 841.09 that same year.

The tech-heavy market, which stagnated due to manipulated filings and misappropriation and embezzlement, continued to rally for six straight days by rising around 1 percent every day.

Experts say stocks tend to surge in January due to expectations for the New Year, with increases in small, mid-size and KOSDAQ stocks standing out.

Samsung Securities said the KOSDAQ since 2001 has outgained the KOSPI eight times in January.

The KOSPI gained 1.4 percent while the KOSDAQ rose 7.5 percent thanks to the strong rally of small and mid-size stocks.

The rally of the tech-heavy index is attributable to the growing appetite for risk in the New Year and attention to issues to benefit from new government policies, according to experts. Efforts to restore market confidence by complementing screening and management systems for listed companies also contributed to the rally.

Korea Exchange said Thursday that 73 of 107 companies that applied for preliminary screening for listing at the KOSDAQ last year passed. Excluding 20 special-purpose acquisition companies, the approval rate is 71.62 percent, lower than 87.5 percent in 2009.

Kim Byeong-yeon, a researcher at Woori Investment Securities, said, “There are signs of overheating on the KOSDAQ with rapid rises from the end of last year, but we see this as positive since the market is resolving its deep-rooted problem of low credibility.”

teller@donga.com