Key points
- The Kosdaq closed August 5 at 799.59, which is 0.41 of a point under 800. It last closed above that level on July 15.
- It has risen 24% in four sessions off its July 30 low of 644.78.
- Buy sidecars fired on July 31, August 3 and August 4, the first three-day run since the market opened.
- 307 Kosdaq companies were under a delisting threshold two weeks ago, and four good sessions don't change that.
On August 5, the Kosdaq closed at 799.59. It's 0.41 of a point under 800, which it last closed above on July 15. Getting back there took four straight up sessions and a 24% rise off the July 30 low. On three of those four days the buying came in fast enough to set off a sidecar, a five-minute freeze on program orders. It had never set off three in a row since the market opened.
Two weeks ago I wrote that 307 Kosdaq companies were sitting under a delisting threshold, about 17% of everything listed there, some with a month left to fix it. The day after that I wrote that the market's daily trading value had fallen to an eleven-month low. One analyst called it the worst neglect since the market opened. Then it fell another 14% over the next eight sessions, down to 644.78 on July 30.
The Kosdaq is Korea's market for its smaller and newer companies. The thing the Korea Exchange used on the way back up is called a sidecar. On the Kosdaq it fires when the Kosdaq 150 futures rise 6% or more while the Kosdaq 150 index rises 3% or more, and both hold there for a full minute. Program orders are frozen for the next five minutes so the automated money stops feeding the move. Most of the time a sidecar is a falling-market tool. All three of these were on the way up. On August 4 the futures were up 6.09% and the index up 6.50% when it triggered, just before 11 in the morning Korea time, the seventeenth sidecar on the Kosdaq this year.
Where the money came from
It came out of the two companies that had been swallowing everything.
On July 31 Korea's new deposit rule on single-stock leverage funds took effect, and trading in those funds fell 76% in a day. Those funds were built on Samsung Electronics and SK Hynix. With that machinery switched off, the money behind it had to go somewhere.
Lee Jae-won and Kim Se-bin, researchers at Yuanta Securities (유안타증권), had written that this was coming before it did. "Money that has left semiconductors is moving into pharmaceuticals, biotech and robots, and rotation buying is flowing in," the two wrote. They added that "with the single-stock leverage ETF regulation taking effect, the trickle-down effect on small and mid-cap growth stocks that we forecast is becoming reality."
Kang Jin-hyuk, a senior researcher at Shinhan Investment Securities (신한투자증권), put the order of it the same way. "Led by biotech, supply and demand flowed into large Kosdaq stocks such as secondary batteries and robots," Kang said.
From July 27 through August 4, institutions net bought 1.1508 trillion won ($809M USD) of Kosdaq shares. Foreigners bought 182.6 billion won ($128M USD), a much smaller number. Individuals were selling into the rise on August 4. By August 5 they were the only net buyers left.
Kang Dae-seung, a researcher at SK Securities (SK증권), pointed at how far the market had already fallen before any of this started. "The Kosdaq index dropped a great deal over that period, so a considerable amount of the selling supply has been worked through," Kang said.
The names that moved on August 4 were mostly medicine. LigaChem Biosciences rose 15.20%, ABL Bio 13.24%, HLB 11.17% and Alteogen 9.29%. Behind them came the chip equipment makers, Jusung Engineering up 6.42% and Leeno Industrial up 4.89%. The battery pair Ecopro and Ecopro BM both finished near 5.9%, and Rainbow Robotics rose 1.85%.
The Korean analysts aren't calling it a turn
Han Ji-young, a researcher at Kiwoom Securities (키움증권), was blunt about what it’s been so far. "For now this is strongly a short-term catch-up move," Han said. The Korean coverage reads the run the same way, as individual money crowding into the most volatile corners of a small market, and it says not to buy in late.
None of the companies on that delisting list got better in four sessions either. A stock lands on it by trading under 1,000 won, about 70 cents, for 30 straight days, and a 24% move in the index doesn't by itself carry those shares back over that line. The ones with the least time left had about a month to go when I wrote about them, which puts them close to the deadline now.
Meanwhile the Kospi rose 3.76% on August 5 and set off a buy sidecar of its own shortly after the open, the twenty-second on that market this year.
Sources
- 뉴스핌, 3일 연속 불타오른 코스닥, 이유는 매력적 가격과 제도 개선 기대, on the SK Securities and Kiwoom comments and the July 27 to August 4 flow figures
- 파이낸셜뉴스, 반도체 떠난 돈, 바이오·로봇으로 이동… 코스닥이 뛴다, on the Yuanta Securities comments
- 데일리안, 간만에 웃는 코스닥…3일 연속 매수 사이드카에 6%↑, on the August 4 close, the sidecar trigger levels, the Shinhan comment and the individual stock moves
- 한국일보, 코스피 올해 22번째 매수 사이드카… 뉴욕 증시 뛰자 6600선으로, on the August 5 closes and the Kospi sidecar
Quotes are translated from Korean. Won figures are converted at 1,423 won to the dollar. This article is for information only and is not investment advice.
