KOSDAQ losing steam on rise of US, Chinese markets

Korea’s tech-heavy KOSDAQ is expected to further lose luster with global capital continuing to flow out of the market and being reinvested in potential mid-cap stocks in the U.S. and China.

Investor interest in China’s promising tech companies listed on the Shenzhen stock market is running high, while the U.S. stock market has recently been rallying on President-elect Donald Trump’s policy for corporate tax cuts and protectionism.

The KOSDAQ, meanwhile, has been facing increased volatility, falling below the 600 mark as foreign investors continue to unload their Korean tech shares.

Last month, foreign investors sold their KOSDAQ shares worth more than 94 billion won, with the daily transactions standing at around 3 trillion won on average, down 16 percent compared to the year before, according to the Korea Exchange.

The KOSDAQ fell 1.2 percent, ending at 586.73 Friday, closing below the 600 mark during the last week of trading.

While the KOSDAQ fell an average of 5 percent over the last month, the Russell 2000 index tracking U.S. small and mid-cap stocks increased 10 percent.

The Chinese and Hong Kong stock regulators are currently preparing for the start of the Shenzhen-Hong Kong Stock Connect next Monday.

The link enables investors, including individuals, to trade Shenzhen tech stocks via the Hong Kong stock market.

“The stock exchanges and the clearing houses have completed a series of market rehearsals with participants in both markets and reported that systems are ready. Trading will commence on Dec. 5, 2016,” the China Securities Regulatory Commission and the Hong Kong Securities and Futures Commission said in a statement.

The market connection between China and Hong Kong comes as China seeks to fully open its capital market by 2020.

China’s Shanghai stock market connected with Hong Kong in November 2014.