Kosdaq vaults past 1,000 as reform drive fuels tech rally

South Korea's secondary bourse, the Kosdaq, surged past the 1,000-point mark Monday, after spending four years below the level. The sharp rally even triggered a temporary trading halt designed to curb excessive volatility.

The tech-heavy index closed at 1,064.41, up 70.48 points, or 7.09 percent, from the previous session, and slightly lower than its day-high at 1,064.44, according to the Korea Exchange. After opening at 1,003.9, the index remained above the 1,000 mark throughout the trading day.

This marked the first time the Kosdaq has topped the 1,000-point threshold since January 2022. The index also climbed past its historic milestone of 1,062.03, set on Aug. 6, 2021 — its highest level since the "dot-com bubble" era, when it soared past the 2,900 mark.

Institutional investors led the rally, net buying shares worth 2.6 trillion won ($1.8 billion) on the bourse. Foreign investors net bought 431 billion won. Retail investors, meanwhile, were the sole net sellers, cashing in a net 2.9 trillion won.

In early trading, the bourse operator activated a buy-side sidecar, a five-minute halt on program trading, after determining that buying pressure could overwhelm the market.

This marked the first time in nine months that a buying sidecar was triggered in the Kosdaq market, following its previous activation on April 10 last year amid a stock market rally sparked by the US administration's suspension of US President Donald Trump's "reciprocal" tariffs.

With the bourse buoyant, Kosdaq's blue-chip stocks surged. Alteogen, Kosdaq's largest company by market value, closed 4.77 percent higher, while EcoPro BM, the second-largest, climbed 19.91 percent.

While the recent stock market rally has been largely led by the main bourse, Kospi, market sentiment toward the Kosdaq has improved as the government has set a target of pushing the index to 3,000 points, in line with its drive to lift the Kospi to 5,000.

President Lee Jae Myung's Thursday luncheon meeting with ruling party lawmakers, who have pushed for bills aimed at revitalizing the capital markets, sparked the latest rally for the Kosdaq. At the luncheon, the lawmakers proposed a plan for the index to surpass 3,000 points by leveraging digital assets.

The policy momentum has raised expectations that the bourse could enter a sustained uptrend.

"Major sectors surged in tandem, driving a sharp rally across the market," said analyst Lee Jae-won from Shinhan Securities.

"Expectations for the activation of security token offerings and the emergence of won-denominated stablecoins are being cited as new growth engines for the Kosdaq market, lifting shares of stablecoin-related companies as well."

Meanwhile, the country's benchmark stock index Kospi remained flat, closing at 4,949.59, shedding 40.48 points, or 0.81 percent, from the previous session.

The Korean won strengthened against the dollar. As of daytime trading’s close, the won was quoted at 1,440.6 per dollar, strengthening by 25.2 won on-session.

During trading, the won even strengthened to 1,438 per dollar, returning to the 1,430 level for the first time since Jan. 2. It marked the largest daily fluctuation of the exchange rate since Dec. 24 last year, when local forex authorities verbally intervened in the market, strengthening the currency by 33.8 won.

The won’s gain stems from the Japanese yen's appreciation following renewed signals of possible currency intervention by US authorities. As the won is a proxy to the yen, the won typically appreciates when the Japanese currency strengthens.

“While part of the move may reflect the coupling of the two currencies, the signal that the US Treasury could tolerate currency intervention by its allies was a key driver for the market,” said Chung Hae-chang, an analyst at Daishin Securities, citing the possibility of coordinated intervention between Korea and the US to rein in forex volatility.

Gold climbed to a fresh all-time high on the day as well, as investors continued their rush to the safe-haven asset. Spot gold prices crossed $5,000 an ounce and extended a record-breaking run.