Morgan Stanley logo appears in this illustration taken December 2025. Reuters-Yonhap
Joon Seok, Morgan Stanley's Korea equity strategist and head of financials research / Courtesy of Morgan Stanley
HONG KONG — With the Korean government reaching its ambitious KOSPI 5,000 goal faster than expected, attention is shifting to the secondary Kosdaq market — a bourse aimed at nurturing innovative, tech-heavy companies, similar to the Nasdaq.
Since the announcement of the Kosdaq 3,000 initiative on Jan. 22, the index has continued to climb, reflecting strong investor enthusiasm. However, Morgan Stanley’s Korea equity strategist and head of financials research, Joon Seok, warned the target may be more difficult to achieve.
"The structure and dynamics of the Kosdaq market are quite different from those of the KOSPI," Seok said. "This is a more challenging target (than KOSPI) but taking the first step is key."
Seok noted that the Kosdaq’s growth-oriented nature leads to greater volatility, driven largely by the short-term trading behavior of retail investors, who account for 80 percent to 90 percent of total trading volume.
In addition, Kosdaq-listed firms tend to have weaker fundamentals and lower transparency than their KOSPI counterparts. The return on equity (ROE) — a key measure of profitability — remains a stark contrast. The KOSPI is projected to post a 17 percent ROE in 2026, versus just 12 percent for the Kosdaq.
Despite this, the Kosdaq trades at a valuation comparable to the Nasdaq, where companies have consistently delivered strong profitability, with ROEs around 20 percent in recent years.
"The key here is to have a lot more quality companies in Kosdaq, and fewer companies that dilute the overall quality of Kosdaq, as discussed on the policy side," Seok said. "There is also a need to improve transparency and access for foreign investors."
The Kosdaq rebounded strongly in 2025, gaining 36.5 percent. Still, that gain lagged the KOSPI’s 75.6 percent surge, according to the Korea Exchange.
Source: Korea Times News
