Kosdaq retreats to year-ago levels as retail investors flee

The Kosdaq has retreated to levels last seen a year ago, weighed down by a rush of capital into single-stock leveraged products and a string of setbacks in the pharmaceutical and biotech sectors.

According to Korea Exchange and Yonhap Infomax, the Kosdaq closed at 748.22 on Friday, down 5.32 percent from the previous session. That was the lowest closing level since June 2, 2025, when the index finished at 740.29 — effectively erasing a full year of gains.

The underperformance is even more striking against the Kospi. Over the same period, the Kospi surged 148.01 percent, rising from 2,698.97 to 6,690.62. The Kospi has pulled back recently on concerns about a semiconductor peak and Middle East geopolitical risks, but its losses have been modest relative to the Kosdaq's steep decline.

The Kosdaq had started the year on a strong footing. It reclaimed the 1,000 mark in January for the first time in about four years and climbed as high as 1,203.84 in April. The index then reversed course as single-stock leveraged ETFs came to market and bad news piled up in the pharmaceutical and biotech sectors. The launch of large-cap single-stock leveraged ETFs in late May accelerated the drain of funds from the Kosdaq.

Average daily trading value on the Kosdaq from May 27 through Friday came to 8.77 trillion won ($5.97 billion), a 39.29 percent plunge from the 14.44 trillion won average recorded from the start of the year through just before those products launched.

Negative developments at top-capitalization pharmaceutical and biotech stocks also dragged the index lower. Rising interest rates added further pressure, as higher discount rates and constrained capital inflows put the Kosdaq at a structural disadvantage.

Retail investor flight has accelerated as a result. Since May 27, individual investors have been net sellers of 1.07 trillion won worth of Kosdaq shares. Over the same period, they were net buyers of 55.78 trillion won on the Kospi.

Market analysts say the government needs to move quickly on measures to revive the Kosdaq and restore investor confidence. A second National Growth Fund worth 600 billion won is set to launch in the third quarter, while a tiered premium-and-standard classification system covering roughly 1,800 Kosdaq-listed stocks is expected to be announced as early as September or October, with implementation slated for the first half of next year.