Concerns have been mounting recently that despite the government’s continued efforts, the secondary stock market Kosdaq may continue to struggle throughout the year due to sluggish investor sentiment here and external trade challenges.

The Kosdaq index on Thursday dived into the 740s, nearing the year’s record-low of 744.11, a figure observed on July 25, according to the nation’s bourse Korea Exchange and Ministry of SMEs and Startups on Sunday.

The index soon rebounded to the 770 point range, closing at 772.3 on Friday, but Thursday’s wobbly session marked a sharp contrast from the uptrend earlier this year, when it hit a yearly high of 927.05, kindling expectations on the Moon Jae-in administration’s economic drive of innovative growth.

 

Seeking to promote fair economic order and to diversify investment opportunities, South Korea’s financial regulator in January had announced a set of plans in January to ease listing rules for the tech-laden Kosdaq market and to set up a 300 billion won ($267 million) fund to invest into its listed firms.

The idea was inspired by the venture promotion policy adopted by the former Kim Dae-jung administration in 1999-2000 in the wake of the Asian financial crisis, which led to an unprecedented venture boom here in timely synergy with global information technology advancement.

The latest government-led fund seemed to ride high, offering an income tax deduction of up to 10 percent within the limits of 30 million won over three years, and rising as a plausible investment channel in the long-stalled Korean economy.

Total sales reached 1 trillion won during the first month in the market and soon soared to 2.76 trillion won within the second month, according to data from the Korea Financial Investment Association.

It recently turned out, however, that most of these Kosdaq funds are running into the red with figures into the double digits.

Also, total assets of these funds stood at 2.99 trillion won as of the end of July, displaying little progress from a month earlier, according to the KFIA and securities industries.

Hindering the Kosdaq market were a series of unfavorable factors, ranging from the overestimation and accounting fraud dispute concerning bio stocks to the recent slowdown of the information technology sector, observers noted.

Weighing further on Asia’s fourth-largest economy were external factors, such as the prolonged trade conflict between the United States and China and the financial unrest in Turkey.

“The government’s decision to focus on SMEs and ventures as a new growth engine amid a stalled economy was reasonable,” said Hwang Se-woon, a senior researcher at the Korea Capital Market Institute.

“But it should also come up with detailed support measures, based on a long-term policy vision, instead of clinging to short-term outcomes.”

By Bae Hyun-jung (tellme@heraldcorp.com)