The KOSDAQ market faces a severe liquidity crisis as trading volume plunged to 4.83 trillion won on the 20th, marking the second consecutive day below 5 trillion won despite multiple government stimulus measures. The index closed at 753.34 on the 21st, up 0.49%, but hit an intraday low of 730.81—the lowest level this year and below the June 2, 2023 level of 733.97 recorded before the current president's inauguration. According to the Korea Economic Daily, the May 27 launch of single-stock leveraged ETFs is identified as the decisive factor behind the liquidity collapse, as individual investor funds shifted away from KOSDAQ stocks. The market has fallen 38.56% from its April 27 peak of 1226.18, representing the largest single-year decline since the 2008 global financial crisis when the index dropped nearly 70%.
KOSDAQ Trading Volume Falls Below 5 Trillion Won for Two Consecutive Days
Trading volume on the KOSDAQ market dropped to 4.83 trillion won on the 20th, following 4.72 trillion won on the 16th. The KOSDAQ index declined 22.4% from 966.59 on the 19th of last month to 749.64 on the 20th, while market capitalization decreased 22.6% from 542.8 trillion won to 420.2 trillion won during the same period. The decline rate in trading volume exceeded double the index and market cap drop rates, indicating transactions are cooling faster than prices. The index ranking among 40 major global stock indices fell from 4th place in April (up 28% year-to-date) to 38th currently. Only Russia's RTSI (-27.8%) and Indonesia's IHSG (-27.1%) posted lower returns than KOSDAQ this year.
Single-Stock Leveraged ETFs Launched May 27 Drain Market Liquidity
The Korea Economic Daily identifies the May 27 introduction of single-stock leveraged ETFs as the decisive trigger for the liquidity collapse. Individual investor funds seeking high-risk, high-return opportunities shifted to these products, draining liquidity from the KOSDAQ market. Lee Jae-won, a researcher at Yuanta Securities, stated: "As leveraged investment in expensive large-cap stocks became possible with small amounts, even momentum-driven funds that were heading to the KOSDAQ market were redistributed to large semiconductor single stocks."
Government Stimulus Measures Fail to Revive KOSDAQ
The government and Democratic Party of Korea first announced the goal of "achieving 3,000 KOSDAQ" in late January. Subsequent stimulus measures included: National Pension benchmark adjustment to reflect 5% KOSDAQ index weighting (January), introduction of premium segment system (March announcement), and National Growth Fund launch (May). Despite these policies, investor attention remained focused on large-cap stocks in the main securities market. Legochem Biosciences exemplifies the failed stimulus impact—despite receiving 500 billion won in National Growth Fund investment, its stock price fell 42% from 155,800 won on June 25 to 90,360 won on the 21st.
377 Companies Face Delisting Risk Under New Market Cap Threshold
As of the 20th closing price, 149 companies traded below 1,000 won per share (penny stocks), according to the Korea Exchange. A total of 221 companies have market capitalizations below 20 billion won, while 377 companies fall below the 300 billion won threshold that will be applied as a delisting criterion starting next year. Securities industry analysts expect the strengthened delisting standards, which take full effect this month, to improve KOSDAQ's structure and credibility. Lee Jae-won of Yuanta Securities noted: "If regulatory improvements to single-stock leveraged ETFs and government KOSDAQ policies ease the concentration of funds, there is a possibility that rotational buying will spread to small and mid-cap growth stocks that have been neglected for a long time. Bottom-fishing opportunities are also open, centered on KOSDAQ stocks that simultaneously meet excessive decline and upward EPS revision."
FAQ
What caused the KOSDAQ liquidity crisis starting May 27?
The Korea Economic Daily identifies the May 27 launch of single-stock leveraged ETFs as the decisive factor. Individual investor funds shifted to these high-risk, high-return products, draining liquidity from the KOSDAQ market as investors redirected capital to large semiconductor stocks through leveraged instruments.
How much has the KOSDAQ index declined from its 2024 peak?
The KOSDAQ index fell 38.56% from its April 27 peak of 1226.18 to 753.34 on the 21st. This represents the largest single-year decline since the 2008 global financial crisis, when the index dropped nearly 70%.
