All 39 Kosdaq sectors post losses this month as AI, chip giants drain market flows

The Kosdaq market is struggling to break free from the shadow of the semiconductor rally. While the Kospi has surged 99.59 percent so far this year, the Kosdaq has fallen 8.01 percent, and every one of its 39 sectors posted negative returns this month. Analysts say the weakness reflects a distortion in market flows driven by a concentration of capital in large-cap AI and semiconductor stocks, rather than any broad deterioration in corporate fundamentals.

According to Korea Exchange data released Monday, all 39 Kosdaq sectors recorded negative returns from June 1 to 26. The Kosdaq 150 industrials sector suffered the steepest decline at minus 35.47 percent, followed by financials (minus 32.63 percent), the technology-listed companies division (minus 32.19 percent), and transportation equipment and parts (minus 31.11 percent). Over the same period, the Kosdaq plunged 20.79 percent — from 1,074.80 to 851.37 — while the Kospi slipped just 0.77 percent, sharply widening the performance gap between the two markets.

The slump extends well beyond this month. On a year-to-date basis through June 26, the entertainment and culture sector led losses among Kosdaq industries with a decline of 45.60 percent. It was followed by the Kosdaq 150 communication services sector (minus 38.66 percent), textiles and apparel (minus 34.55 percent), the Kosdaq technology-growth companies division (minus 33.74 percent), publishing and media reproduction (minus 33.56 percent), IT services (minus 33.55 percent), and the Kosdaq 150 consumer discretionary sector (minus 33.18 percent). Only eight of the 39 sectors managed to stay in positive territory for the year.

Analysts view the Kosdaq's weakness as the result of supply-demand distortions caused by capital flowing into large-cap AI and semiconductor stocks, rather than any deterioration in company competitiveness. "The Kosdaq's underperformance is often attributed to weaker fundamentals compared with the Kospi, but market concentration is just as significant a factor," said Kim Jun-young, a researcher at iM Securities. "As long as the preference for large-cap AI and semiconductor stocks persists, the concentration in the S7 — Samsung Electronics, SK hynix, SK Square, Samsung Electronics preferred shares, Samsung Electro-Mechanics, Samsung Life and Samsung C&T — will continue, and the Kosdaq's relative weakness is likely to persist as well."

Kim also noted that the Kospi's market capitalization trend, excluding the S7, has moved in a pattern similar to the Kosdaq. That suggests the Kospi's strength reflects a handful of mega-cap stocks lifting the index rather than a broad-based market rally.

Some analysts argue that the Kosdaq's weakness cannot be explained solely by the concentration in large-cap semiconductor stocks. Retail investor flows, which have long underpinned the Kosdaq, have weakened, while earnings estimates for the Kospi are being revised upward on the back of the semiconductor sector — a recovery the Kosdaq has been slower to share. Analysts also point out that the US Federal Reserve's continued tightening stance leaves the Kosdaq, with its higher proportion of growth stocks, more exposed to interest rate pressure.

"All three factors — supply-demand flows, earnings and interest rates — currently favor the Kospi," said Lee Jae-won, a researcher at Yuanta Securities Korea. "The Kosdaq's relative underperformance is likely to continue until a recovery in retail investor flows and a rebound in earnings estimates can be confirmed."

Market participants are watching whether the government's Kosdaq revitalization policies and the "KOSDAQ CONNECT 2026" event, scheduled from Wednesday through Friday, could help restore investor sentiment. The Kosdaq surged more than 6 percent during intraday trading Monday, recovering the 900-point level, and a sidecar mechanism was triggered for the first time in about 12 trading sessions — signs of a technical rebound following the index's steep losses.

"The Kosdaq is a market highly sensitive to policy shifts, so if expectations for revitalization measures — such as the introduction of a promotion-and-relegation system — spread at KOSDAQ CONNECT 2026 from Wednesday through Friday, that could become a key factor determining the strength of any rebound," said Han Ji-young, a researcher at Kiwoom Securities.