In-Depth Analysis of the KOSDAQ Market
Current Challenges and Proposals for a Resurgence
This report diagnoses the structural limitations of the KOSDAQ market from a foreign investor's perspective and proposes policy directions for its transformation into a sustainable innovation ecosystem. Click the tabs below to explore the information interactively.
Why Do Foreign Investors Overlook KOSDAQ?
The challenges facing the KOSDAQ market stem from a complex mix of macroeconomic factors, internal market issues, and individual company-level problems.
🌍Macro Investment Environment
- Rise of Passive Investing: Global capital follows indices, structurally sidelining KOSDAQ due to its minimal weight in major benchmarks.
- High FX Volatility: During geopolitical risks, the Korean Won's depreciation raises currency loss concerns, prompting foreign investors to sell risk assets like KOSDAQ stocks.
🏛️Internal Market Flaws
- Structural Vulnerability: Heavy concentration in specific sectors like biotech, and a "hollowing out" as successful firms move to KOSPI.
- Crisis of Trust: Recurring scandals, opaque accounting, and weak corporate governance are key deterrents.
- Ambiguous Identity: Lacks a clear role and vision, caught between the large-cap KOSPI and the early-stage KONEX market.
🏢Difficulty in Corporate Valuation
- Information Asymmetry: Lack of professional analyst coverage and insufficient English disclosures increase information acquisition costs.
- Valuation Dilemma: Many biotech and AI firms with unpredictable future cash flows make traditional valuation models (like DCF) difficult to apply.
Structural Vulnerability: Sector Concentration
KOSDAQ's market capitalization is dominated by a few specific sectors, particularly pharma/biotech and secondary batteries. This creates systemic risk, where the entire market can be swayed by the performance of these industries. Hover over the chart to see the weight of each sector.
The Valuation Dilemma: Interactive WACC Experience
The discount rate (WACC), a core component of valuation, varies significantly with market risk (Beta) and expected returns (MRP). KOSDAQ firms often have high Betas due to volatility, which can lead to undervaluation. Adjust the sliders below to see how WACC changes in real-time.
Calculated Weighted Average Cost of Capital (WACC)
9.28%
(Assuming Risk-Free Rate: 2.5%, Cost of Debt: 3.0%, Tax Rate: 24%, Capital Structure E:D 95:5)
Comprehensive Policy Proposals for KOSDAQ's Revival
A holistic solution focusing on structure, trust, and growth is needed for a fundamental overhaul of the market.
- Ensure Full Independence of the KOSDAQ Committee: Elevate it to a decision-making body independent from the Korea Exchange to enhance fairness and credibility.
- Rebrand as a 'Global Tech Market': Move beyond a 'SME market' identity to become Asia's leading tech market, actively attracting quality foreign tech firms to diversify the portfolio.
- Promote Competition with Alternative Trading Systems (ATS): Encourage a multi-exchange system to foster healthy competition, increasing trading efficiency and liquidity.
- Redesign Listing/Delisting Criteria: Reduce ambiguous qualitative evaluations and implement a swift exit system for marginal companies to strengthen the market's self-cleansing function.
- Improve Foreign Investor Accessibility: Phase in mandatory English disclosures and abolish/simplify the complex investor registration process to resolve information asymmetry.
- Provide Long-Term Investment Incentives: Offer tax benefits for funds holding KOSDAQ stocks long-term to attract 'patient capital' over short-term speculation.
- Vitalize the M&A Market: Establish diverse exit routes beyond IPOs, such as M&A, to create a virtuous cycle in the venture ecosystem.
- Support Small-Cap Research Coverage: Subsidize brokerages to publish analysis reports on neglected small-cap stocks to clear the 'information fog'.
