Kosdaq bonanza

The tech-heavy Kosdaq market has been displaying unusually robust advance. The Kosdaq index surpassed the 600 mark for the first time in six years and eight months on Thursday, and increased further on Friday to close at 604.13. “Investing in Kosdaq with loans” has become a phrase in vogue. In fact, the credit outstanding on the market has snowballed to nearly 3 trillion won (2.75 billion U.S. dollars). Investors say that they bought promising Kosdaq companies and made huge profit. As always, experts have mixed views, with some saying that the bullish market will continue and others claiming that it will significantly fluctuate.

The Kosdaq market has had extreme ups and downs in the course of its history. The bourse, which opened in 1996 to enable small and medium-sized companies and venture firms to raise fund, experienced a hay day due to a "venture boom," soon after the Asian financial crisis. Shares of Saerome Technology, the firm with the largest market capitalization at the time, increased 120 folds from 2,575 won (2.36 U.S. dollars) per share to about 300,000 won (275 dollars) in a matter of six months. "Future and People" created investment fever by developing a "cooling can" that does not require refrigerator. They all fail to embrace successful conclusions, however. Most companies’ stock plummeted due to a performance that was weaker than expected. Those who took the brunt of damage were individual investors who belatedly jumped into the market.

For many years, Kosdaq has been a "legal casino." Company heads lost investor confidence due to frequent stock price riggings, embezzlement and malfeasance. Even employees of securities companies advised people to “stay away from Kosdaq if you don’t want to be cheated by con artists.” Sound companies such as NHN, LG Telecom and Asiana Airlines moved from Kosdaq to the main Kospi market. The Kosdaq market has caught on anew recently because listed companies have seen their financial conditions strengthen, while the market itself has become somewhat more transparent.

Dynamic switching of Kosdaq players is another important cause. While most of the top 10 companies in total market capitalization on Kospi have remained unchanged from seven years ago, many of those on the Kosdaq market have been replaced. Mega Study, Hanaro Telecom and Taewoong, which were among the top contenders in 2008, have made way for Daum Kakao, Celltrion, Paradise, and Dongsuh, which emerged as the new Top Five. Companies that stand out now are those of future growth industries including healthcare, bio and pharmaceuticals, cultural contents, and Internet. Only when new industries and next generation players constantly emerge and grow, then will Korea have a healthy market economy. Kosdaq has a long way to go until it develops to the likes of the Nasdaq market in the U.S., which spawned and nurtured Microsoft, Google and Apple.