Market liquidity that had been concentrated in Samsung Electronics and SK Hynix is rotating into KOSDAQ growth stocks, and exchange-traded funds (ETFs) holding leading KOSDAQ companies are delivering standout performance. The South Korean government’s KOSDAQ market revitalization policies, combined with expectations for the execution of the 150 trillion won (approximately $109.4 billion) National Growth Fund, have rapidly improved returns for related products.

According to the Korea Exchange on the 28th, Shinhan Asset Management’s SOL KOSDAQ TOP10 posted a one-month return of 14.94% as of the previous day, ranking first among KOSDAQ-related ETFs listed in South Korea. The product invests in the 10 KOSDAQ constituents with the largest three-month average daily free-float market capitalization. It is designed to provide diversified exposure across growth industries representing KOSDAQ, including robotics, semiconductor materials/components/equipment, secondary batteries, and biotech/healthcare.

The underlying KOSDAQ TOP10 Index caps inclusion at a maximum of three stocks from any single Global Industry Classification Standard (GICS) industry group. This mechanism is designed to prevent excessive concentration in any particular sector. Key holdings include Alteogen, EcoPro, EcoPro BM, Rainbow Robotics, Leeno Industrial, Wonik IPS, and EO Technics.

Non-Semiconductor Sectors Surge as Semiconductors Trade Sideways

The KOSPI has risen 3.73% this month, but Samsung Electronics and SK Hynix—the stocks that have led the South Korean market—have actually moved in reverse. From the 3rd through the 27th, Samsung Electronics fell 0.95% from 262,500 won to 260,000 won (approximately $190), while SK Hynix declined 0.70% from 1,718,000 won to 1,706,000 won (approximately $1,200).

By contrast, sectors that had been relatively neglected posted a flurry of double-digit gains. Based on KOSPI sector indices, construction surged 30.32% for the highest return, followed by machinery and equipment (17.56%), metals (16.45%), chemicals (13.40%), general services (13.08%), and telecommunications (11.92%). Within construction, Kumho Engineering & Construction (77.06%), Xi S&D (72.50%), GS Engineering & Construction (53.94%), and Daewoo Engineering & Construction (49.84%) posted the largest gains.

Small- and mid-cap strength has also been a defining feature of this month’s market. The KOSPI 200 index rose just 2.86%, while an index composed of stocks excluded from the KOSPI 200 climbed 11.77%. The KOSPI 200 mid-cap index surged 15.33%. While KOSPI large caps rose 3.11%, mid caps and small caps gained 12.09% and 9.13% respectively.

Foreign Investor Rotation and Policy Expectations

Foreign investor flows have also shifted markedly. From the start of the month through the 27th, foreign investors net sold 3.46 trillion won (approximately $2.5 billion) of Samsung Electronics and 1.35 trillion won (approximately $984.4 million) of SK Hynix. The combined outflow from the two stocks reached 4.81 trillion won (approximately $3.5 billion). Meanwhile, they showed buying interest in Samsung SDI (480.3 billion won), LG Energy Solution (251.4 billion won), Naver (234.2 billion won), Doosan Enerbility (225.4 billion won), and Korea Zinc (218.4 billion won). In construction, foreign capital also flowed into GS Engineering & Construction (201.8 billion won), Hyundai Engineering & Construction (164.6 billion won), and Daewoo Engineering & Construction (110.8 billion won).

Policy discussions aimed at revitalizing the KOSDAQ market are also underpinning investor sentiment. The KOSDAQ tier system, with detailed criteria expected to be unveiled as early as next month, will classify listed companies into premium, standard, and watchlist tiers, adjusting their market assignment based on set standards. The core objective is to encourage the growth of quality innovative companies while screening out underperforming firms to enhance overall market credibility and competitiveness.

The 150 trillion won (approximately $109.4 billion) National Growth Fund is also expected to strengthen the mid- to long-term growth foundation for KOSDAQ companies. The fund will supply capital to advanced strategic industries—including artificial intelligence (AI), semiconductors, mobility, biotech/vaccines, and secondary batteries—and their related ecosystems. Given that numerous KOSDAQ-listed companies operate in the targeted industries, the fund is expected to positively impact investment conditions and sentiment for these companies.

Kim Jung-hyun, head of Shinhan Asset Management’s ETF business group, said: “In the process of market liquidity normalizing, a favorable investment environment is likely to form around large-cap KOSDAQ stocks that have the earnings, technology, and liquidity to attract institutional and foreign investor access.”

Securities industry analysts characterize the recent market as a broadening rally in which leadership is expanding, rather than the exit of the previous semiconductor-led regime. Kim Sung-geun, an analyst at Mirae Asset Securities, said: “Given the funding cost burden associated with expanding AI investment, a strategy of diversifying investment targets is more advantageous than concentrating on semiconductors and big tech. Investors need to broaden their focus to infrastructure expected to benefit from data center investment and healthcare where AI adoption is expanding.”