KOSDAQ Heating Up

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South Korea’s tech heavy bourse the KOSDAQ has risen more than 100 points over the past two months to approach the 800-point level. Expectations are running high for the return of the small-capital market boom of the early 2000s, but some are concerned that the market may be overheating.

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The KOSDAQ has risen to just under the 800-point mark. As recent as two months ago, Korea's secondary stock exchange hovered at under 650 points. Since October, however, the tech-heavy bourse started riding the momentum to surpass 700 points on November 3rd and broke through the 800-point line at one point on the 24th. The amount transacted at KOSDAQ, which was about half that of the larger KOSPI, overtook KOSPI in the middle of last month to exceed 10 trillion won. KOSDAQ's big surge is seen as the result of the government's policy commitment to re-energize the smaller, IT-focused stock market.

[Soundbite] Choi Jong-ku(Chairman, Financial Services Commission(Jul. 26)) : "We will strengthen the growth ladder for start-ups and small-and-medium venture firms in the capital market that encompasses crowd funding, KONEX, and KOSDAQ."

The government is expected to present a KOSDAQ revitalization plan by the end of this year, which experts say is giving a big boost to the KOSDAQ numbers. Pension funds and foreign investors have responded to the government plan by purchasing stocks on KOSDAQ, eventually driving up stock prices. However, it is atypical for KOSDAQ quotes to go up by more than 100 points in just two months, which is why some experts are concerned about overheating. In particular, investors are buying up massive amounts of pharmaceutical and bioengineering stocks, driven by expectations of the successful development of new drugs. However, experts point out that there are also risks.

[Soundbite] Lee Seon-yeop(Shinhan Investment Corp.) : "There are concerns over the possibility that corporate performance may fall short or high expectations could die out without producing real results."

The financial authorities should toughen its oversight of the KOSDAQ market and strengthen their management of market soundness.