[Edaily Kwon Oh Seok Kim Hyung-il Reporter] Although the government has rolled out a wide range of measures this year to revitalize the KOSDAQ market, the market’s response has been lukewarm. Despite the government’s announcement of the ambitious “KOSDAQ 3,000” goal, retail investors are turning their backs on the KOSDAQ market, and the index continues to trend downward. Critics are calling for fundamental improvements to the market’s structure, including the development of a new index focused on high-quality tech companies and the implementation of benefits for both companies and investors.

In the second half of this year, the government significantly tightened delisting criteria to weed out penny stocks (stocks priced below 1,000 won) and companies that fall short of market capitalization thresholds (30 billion won for KOSPI and 20 billion won for KOSDAQ). It has also staked everything on reviving the market by encouraging “value-up” disclosures from companies listed under the technology special listing program and injecting funds into the KOSDAQ market through the National Growth Fund.

However, market trends are moving in the exact opposite direction of the policy goals. On the KOSDAQ, institutional investors made net purchases totaling approximately 10.824 trillion won over the past year, while retail investors exited the market by making net sales amounting to 5.978 trillion won. In particular, since the KOSDAQ index hit a record high of 1,226.18 on April 27 of this year, the market has been on a steady downward trend, and even institutional investors have turned to selling.

The securities industry cites diminished investment appeal and a lack of earnings growth as the primary causes of the capital outflow from the KOSDAQ market. Park Yeon-ju, Head of the AI Research Center at MIRAE ASSET SECURITIES, stated, “In the first half of the year, corporate earnings growth was concentrated in large-cap KOSPI stocks centered on AI semiconductors, but in the second half, the KOSDAQ market was also affected as investment sentiment weakened due to high interest rates and increased overall market volatility.” “Capital flows to areas with clear profit growth; this year, domestic large-cap stocks centered on AI semiconductors and key global AI companies saw significant profit growth,” she added.

Capital market experts unanimously agree that the “swift delisting of underperforming companies” is the first step toward revitalizing the KOSDAQ. However, even this effort has hit a snag after a court recently granted preliminary injunctions to some companies, putting the brakes on policy implementation.

Lee Jun-seo, a professor in the Department of Business Administration at Dongguk University, pointed out, “To revitalize KOSDAQ, we must ensure both soundness and profitability,” adding, “I believe that the failure to implement the delisting system as originally planned is one of the fundamental causes hindering KOSDAQ’s revitalization. If market soundness is not guaranteed, investors will inevitably hesitate to invest.”

The exodus of high-quality companies is also a major factor diminishing KOSDAQ’s appeal. Even #Alteogen Inc., KOSDAQ’s top-ranked company by market capitalization, postponed its planned move to the KOSPI after initially considering it. Previously, there have been cases where top-tier companies by market capitalization—such as Kakao(035720)and Celltrion(068270), which were once blue-chip stocks—moved from KOSDAQ to the KOSPI.

There are calls for the urgent development of a new benchmark index that captures KOSDAQ’s unique growth potential, along with incentives to keep high-quality companies on the KOSDAQ market. Professor Lee Jun-seo stated, “Rather than simply adding new measures, it is more important to select high-quality, growth-oriented companies to build a solid investment foundation for the market. The current KOSDAQ 150 has limitations in that it does not sufficiently represent the growth potential of the KOSDAQ market.” He added, “We need to develop a growth-focused index that represents KOSDAQ and create exchange-traded funds (ETFs) that track it to attract capital inflows.”

There are also growing calls to establish a tax and institutional support system targeting both companies and investors to ensure that high-quality companies remain on the KOSDAQ and continue to grow. Center Director Park Yeon-ju remarked, “While delisting underperforming companies is the starting point for restoring market confidence, it is also important to establish systems—such as tax incentives for research and development and investment, as well as support for technology and human resources—that enable companies to enhance their competitiveness.” She added, “Expanding tax benefits for investors who make long-term investments in strong small and medium-sized enterprises, and conducting fund evaluations from a medium- to long-term perspective rather than a short-term one, will help foster a culture of long-term investment in quality companies.”