📚 KOSDAQ Series — Part 2. Part 1: KOSDAQ Complete Guide for Foreign Investors — 1,820 Companies, October 2026 Promotion / Relegation Reform

KOSDAQ’s promotion-relegation reform launches in October 2026. Only 100 of ~1,820 listed companies enter the Premium tier. The criteria are financial soundness, growth, and governance. That’s screen-able now. The wide net (ROE ≥15%, OP growth positive) returns 105 candidates. The tight net (ROE ≥25%, daily turnover ≥₩1bn) returns 35. Layering ROE + operating margin + earnings growth + foreign-and-institutional flow as 4 simultaneous filters compresses to 6 names. 1,820 → 105 → 35 → 6 — the final candidate set is 0.3% of the listed universe. The real alpha in this reform is not owning KOSDAQ broadly. It is the separation between names institutions can buy and names they cannot.

TL;DR

• The 2-stage funnel: 105 → 35 → 6. Filter 1 (ROE ≥15%, OP growth positive) clears 105 of KOSDAQ’s ~1,820 names. Filter 2 (ROE ≥25%, ₩1bn daily turnover) cuts to 35. The intersection of high ROE, high margin, growth, and constructive flow narrows to 6 names — 0.3% of the universe.
• Three different shapes — growth, margin, value. Silicon2 (ROE 47%, margin 18%, PER 15×) for balanced growth. Classys (ROE 26%, margin 51%, PER 27×) for highest-quality margins. Easy Bio (ROE 29%, PER 7×) for value.
• The real alpha is in classification, not the list itself. The 2022 KOSDAQ Global Index proved curation works (+160% vs. broad +65%). It also proved that a “good list” without ETF / NPS / institutional plumbing doesn’t move money. The October reform is designed to fix the second part — Premium ETFs, NPS benchmark inclusion, and the People’s Growth Fund are the three explicit channels.
• There are losers from the reform too. If Premium criteria are earnings-based, large-cap-but-loss-making names — Ecopro BM at PER ~596×, ABL Bio at -₩48.6bn, Robotis at PER ~390× — risk exclusion. Falling out of Premium means losing institutional and passive flow, which is a negative alpha vector worth tracking on the short side.
• Don’t buy KOSDAQ. Separate it. The investment substance of the reform is identifying which KOSDAQ names institutions will be forced to own and which will lose their pseudo-benchmark status.

1. Why ROE matters — Premium-tier inclusion logic

1.1 The Premium tier’s selection criteria

Part 1 covered the headline framework: Premium (Tier 1) holds ≤100 names selected on financial soundness, growth, and governance. Final criteria are still being calibrated, but the existing KOSDAQ Global Segment requirements offer a useful prior:

• Market cap ≥₩500bn or top 7%
• Operating profit ≥₩30bn OR revenue ≥₩300bn
• Corporate-governance rating ≥B
• Financial-health and disclosure-quality requirements

Premium will likely be tighter than this. The design intent is “names that actually earn money,” not “names with large caps alone.”

1.2 Why ROE is the right starting filter

ROE measures how efficiently equity capital generates earnings. High ROE = the business uses small capital to produce large profit.

For Premium-inclusion screening, ROE works because:

High ROE:
→ Business has an earnings base (loss-making companies have meaningless ROE)
→ Capital efficiency — exactly what pension funds underwrite
→ Compatible with both growth and quality screens

Low ROE:
→ Either no earnings, or capital base too large relative to earnings
→ Pension capital can't easily be deployed
→ Lower probability of Premium inclusion

1.3 What the KOSDAQ Global Index already proved

KOSDAQ Global Index (\~50 quality names):
2022.11.21 inception (1,000) → 2026.05.08 (2,602) → +160.2%

Broader benchmarks (same period):
KOSDAQ broad: +65%
KOSDAQ 150: +93%
KOSDAQ Global: +160%

Annualized:
KOSDAQ Global: \~31.8% CAGR
KOSDAQ 150: \~20.9% CAGR
KOSDAQ broad: \~15.6% CAGR

Verification: Global CAGR = (2,602 / 1,000)^(1/3.46) - 1 = 31.8% ✓

The asset class isn’t the problem. Selection is. The Premium reform institutionalizes selection. For investors, the alpha lies in identifying probable-Premium names before the list is published.

2. The 2-stage funnel — wide net to tight net

2.1 Filter 1 — ROE ≥15% + positive OP growth

Start with the widest defensible net.

Filter 1 conditions:
- ROE ≥15%
- OP growth YoY positive
- OP positive (no losses)
- No liquidity / flow / PER constraints applied

(Financial cut: 2026-05-07. Price / flow cut: 2026-05-08.)

105 of KOSDAQ’s ~1,820 names clear Filter 1 — about 5.8%. That’s the size of the universe of profitable, growing, high-ROE businesses on the small-cap board.

The top 27 of the 105, sorted by ROE:

Three things become immediately visible:

One — Filter 1 alone mixes good candidates with traps. S-Connect (+390% over 20 days), Dawonnexview (+96%), Mico (+72%) — already-overheated names. BHI (institutional net sells -₩141.4bn) — money walking out the door. Hanpass (data instability) — newly listed, unreliable record.

Two — high ROE with thin margin is a quality trap. Sungho Electronics (ROE 46.3%, margin 3.3%), ITCEN Global (margin 3.2%), S-Connect (margin 4.8%). Margins this thin disappear at the first environmental change.

Three — Inca Financial Service stands out. ROE 39.7%, PER 9.1×, clean Filter-1 entry. Margin 9.3% and 20D price -12% mean it’s not a market leader. Discussed separately as a “non-AI quality candidate” in §5.

2.2 Filter 2 — ROE ≥25% + ₩1bn daily turnover

Tighten Filter 1’s 105 with two more constraints.

Filter 2 additional conditions:
- ROE ≥25% (up from 15%)
- 20-day average daily turnover ≥₩1bn

This returns 35 names — under 2% of the listed universe.

2.3 Filter 2’s top 10

2.4 Lesson — quality rises with each cut

Funnel by stage:
Total KOSDAQ:                                   1,820
Filter 1 (ROE ≥15%, OP growth +):                 105 (5.8%)
Filter 2 (ROE ≥25%, ₩1bn turnover):                35 (1.9%)
Filter 3 (ROE+margin+growth+flow combined):         6 (0.3%)

1,820 → 105 → 35 → 6. The final investable candidate set is 0.3% of the universe. This is the operational mechanic behind the KOSDAQ Global Index’s 2.5× outperformance — narrow enough selection, applied consistently.

2.5 The five high-ROE traps to avoid

Trap 1 — High ROE with thin margin. Sungho Electronics (ROE 46.3%, margin 3.3%). High ROE looks attractive but earnings quality is low.

Trap 2 — Holding-company accounting. Soulbrain Holdings (ROE 32.1%, PER 1.6×, margin 1.6%). PER 1.6× looks impossibly cheap, but margin 1.6% suggests holdco-accounting structure rather than operating reality.

Trap 3 — Data instability. Hanpass (ROE 94.2%). Newly listed; data history hasn’t stabilized.

Trap 4 — Already overheated. Mico (20D price +71.6%). Flow is constructive but the move is too fast — buying now is chasing.

Trap 5 — Best-in-class quality at unsupportable multiple. Alteogen (ROE 39.4%, margin 49.5%, PER 170.7×). Fundamentally a great business, but the multiple already prices several years of expected growth.

3. The 6 names that pass all four filters

3.1 Silicon2 — most balanced growth

ROE 46.9% / Margin 18.4% / OP growth +49.3% / PER 14.8×
20D F+I net buy: +₩58.6bn
20D price: +9.2%

K-beauty distribution platform — connecting Korean cosmetic brands to overseas channels. The structural advantage is brand-agnostic exposure: with a portfolio of brand mandates rather than a single hero brand, brand-cycle risk is diversified.

ROE 47%, margin 18%, growth +49%, PER 15×, F+I flow strongest in the cohort at +₩58.6bn. Cleanest 4-of-4 simultaneously.

The caveat is that it’s already a known leader — chasing carries setup risk. Watch the 43,000–45,000 won support zone or a confirmed breakout above the prior high.

3.2 Classys — highest-quality margins

ROE 26.2% / Margin 50.7% / OP growth +39.4% / PER 27.1×
20D F+I net buy: +₩11.2bn
20D price: +5.3%

Aesthetic medical-device company. HIFU (high-intensity focused ultrasound) systems plus consumables sold to dermatology clinics globally.

Margin 50.7% is the headline — best-in-class even within the high-ROE cohort. Razor-and-blades structure: device sale + recurring consumable. 2026 estimate ROE 29.4%, PER 19.4× — not particularly stretched for a quality compounder.

Watch around the 55,000-won support zone.

3.3 GlobalTaxFree — cheapest of the high-ROE set

ROE 27.8% / Margin 18.8% / OP growth +34.3% / PER 9.1×
20D F+I net buy: +₩6.4bn
20D price: +20.4%

Tax refund operator for foreign tourists in Korea. As Korea attracts more visitors driven by K-content and K-beauty tourism, the structural revenue pool grows.

ROE 28%, margin 19%, PER 9× — cheapest in the high-ROE cohort. Risk: any softening in tourism / consumption flow can compress the multiple quickly.

3.4 Easy Bio — cheapest high-ROE value play

ROE 29.1% / Margin 9.4% / OP growth +38.9% / PER 7.0×
20D F+I net buy: +₩1.7bn
20D price: +3.5%

Covered in detail across Part 1 and Part 2 of the Easy Bio sequence. 78% of revenue is now feed additives, building a North America M&A platform. Trades at a 50–64% discount to global peers (Phibro 18×, Anpario 15×).

PER 7× with ROE 29% — a rare combination across the entire Korean market. Cheap high-ROE value play, though not a market leader by character. Margin of 9.4% means it isn’t a high-margin business. Premium-inclusion eligibility depends on whether market cap and absolute earnings clear the still-being-finalized criteria.

3.5 KNJ — numbers good, flow not yet engaged

ROE 30.8% / Margin 26.3% / OP growth +57.4% / PER 6.8×
20D F+I net buy: -₩0.9bn
20D price: +10.9%

Semiconductor wet-cleaning / etching equipment. Numbers are excellent — ROE 31%, margin 26%, growth +57%, PER 7×. But foreign + institutional flow at -₩0.9bn means institutions haven’t engaged.

Buy priority is lower until flow inflects. Good numbers without institutional engagement don’t typically move the price meaningfully.

3.6 PharmaResearch — quality good, flow exiting

ROE 26.9% / Margin 40.0% / OP growth +70.0% / PER 28.4×
20D F+I net buy: -₩21.9bn
20D price: +15.8%

Maker of Rejuran (PDRN-based skin regeneration product). Margin 40%, growth +70% — quality is high. But 20D F+I flow at -₩21.9bn means institutions are net sellers. Price went up, institutions sold — a classic “be careful” combination.

4. Where the real alpha lies — at the separation, not the list

4.1 Don’t own KOSDAQ broadly

A “buy KOSDAQ” trade off the reform headline has no alpha. As shown in Part 1, much of the 1,820-name universe is loss-making or theme-driven.

The alpha is in the separation between names institutions can buy and names they cannot:

If included in Premium:
→ Auto-inclusion in dedicated Premium index ETFs
→ Eligible for pension allocations
→ Liquidity uplift, multiple re-rating

If excluded from Premium:
→ Same retail-driven flow regime as before
→ Possible loss of "leader" status
→ Names with cap-only profile (no earnings) may face further derating

4.2 The Premium-reform losers

This is the under-discussed angle. If Premium criteria are earnings-based, large-cap-but-loss-making names that currently sit in KOSDAQ 150 risk Premium exclusion:

These aren’t bad businesses. They may have large future growth. But if Premium criteria require current earnings, exclusion would mean loss of institutional and passive-flow access — a negative alpha vector worth tracking on the short side, or at minimum a position-size reduction signal.

4.3 Three tradable angles

Angle 1 — Already-quality names that gain incremental flow. Leeno Industrial, Jusung Engineering, KOSDAQ Global Segment incumbents. Probably included in Premium. But the incremental alpha is limited — quality is already in the multiple.

Leeno’s 1Q26: revenue ₩99.8bn, OP ₩47.3bn, margin 47.4%. Target prices revised up to ₩150,000. High inclusion certainty but a less asymmetric setup than Angle 2.

Angle 2 — Earnings inflection + Premium-inclusion catalyst. Simmtech is the cleanest example. 2025 OP ₩11.9bn → 2026E OP ₩120-150bn — a 10× lift driven by AI server / memory module substrate mix shift. The market currently treats it as a cyclical-substrate recovery name. If 2026 OP exceeds ₩100bn, it becomes a viable Premium-inclusion candidate. Earnings inflection + policy-driven flow = double re-rating.

Angle 3 — Non-AI quality candidates. Inca Financial Service. Insurance distribution (general agency) business: 2025 revenue ₩1.022tn, OP ₩95.2bn, NI ₩71.3bn. 2026 NI target ~₩100bn. The market will likely interpret KOSDAQ reform through an AI / biotech / robotics lens — but if Premium criteria are earnings-and-governance based, profitable non-AI names also qualify. Surprise re-rating optionality.

5. Cross-section — high-ROE candidates × Premium-inclusion probability

5.1 High-ROE names with Premium-inclusion probability

5.2 Lower-ROE but high Premium probability

ROE under 25% can still clear Premium if absolute earnings and stability are strong:

• Leeno Industrial — margin 47%, 1Q26 OP ₩47.3bn. Stable inclusion candidate.
• Jusung Engineering — flagship semi-equipment name. Cap and earnings both clear typical thresholds.
• SOOP — internet-broadcast platform. Stable profitability.
• Simmtech — 2026 OP >₩100bn would clear earnings criterion.
• Inca Financial Service — NI ₩70-100bn band. Non-AI quality candidate.

6. Caveats

6.1 Final criteria not yet published

The most important caveat. Final Premium-100 criteria are not yet released. Industry briefings are scheduled for June and finalization for July. This screen is probable-candidate identification, not a confirmed list.

6.2 High ROE has many traps

ROE alone is not enough. Earnings quality (margin), persistence (growth), and market validation (flow) must align. High ROE with 3% margin, holdco accounting, or unstable data history fails the quality test even if ROE numerically clears.

6.3 APR is KOSPI-listed, not KOSDAQ

For the avoidance of doubt — APR (KOSPI 278470) is on KOSPI, not KOSDAQ, and is not a direct beneficiary of the KOSDAQ promotion-relegation reform. Same with Cosmax (KOSPI 192820). Both are well-known Korean beauty names but on the wrong exchange for this reform.

6.4 Premium inclusion ≠ guaranteed price appreciation

If included, passive flow can arrive — but the lesson of the 2022 KOSDAQ Global Index is that the list part is easier than the flow part. Whether ETFs scale, NPS adopts the benchmark, and the People’s Growth Fund actually deploys to KOSDAQ — those determine whether classification translates to multi-year price action. Visible only after October.

7. Practical priority

8. Bottom line

The investment substance of the KOSDAQ reform is not “buy KOSDAQ.” It is the separation between names institutions can own and names they cannot.

Premium-100 inclusion isn’t about market cap — it’s about earnings. The wide net (ROE ≥15%, OP growth positive) clears 105 of 1,820 (5.8%). The tight net (ROE ≥25%, ₩1bn turnover) clears 35 (1.9%). The simultaneous-4 (ROE + margin + growth + flow) clears 6 (0.3%). Silicon2 is the most balanced, Classys the highest-margin, Easy Bio the cheapest.

The corollary matters as much as the headline. Names that fail Premium criteria — large-cap-but-loss-making — face institutional and passive-flow loss. That’s a negative alpha angle worth tracking, possibly via reduced position size on cap-heavy thematic names.

Final criteria publish in July. Until then, the candidate list is preliminary. The October launch is when ETF / NPS / People’s Growth Fund deployment begins, and that’s when real flow either validates the curation or proves the 2022 KOSDAQ Global Index lesson all over again. The KOSDAQ Global Index showed selection matters 2.5× more than asset class. The same logic applies to Premium — which names you choose drives everything.

FAQ

Q: Why ROE as the starting filter? A: Premium-tier criteria emphasize “financial soundness and growth.” ROE captures both — it indicates the business has an earnings base and is using capital efficiently. This is exactly the profile pension capital can underwrite. A practical first filter for Premium-eligibility screening.

Q: Why narrow from 105 to just 6 final candidates? A: ROE alone is not enough. Earnings quality (margin), persistence (growth), and market validation (foreign + institutional flow) all need to coincide. The intersection across all four filters is the 0.3% of the universe — and this 0.3% is where the alpha sits.

Q: Why does Alteogen drop out of the final 6 despite having ROE 39%, margin 49%? A: Because PER 170× already prices in multi-year forward growth. “Good business” and “good entry price” are different questions. Alteogen the company is high-quality; Alteogen the entry-level position is not.

Q: Which names are likely to be excluded from Premium? A: Large-cap-but-low-earnings names. Ecopro BM (PER ~596×), ABL Bio (loss-making, -₩48.6bn), Robotis (PER ~390×). Future growth potential aside, current earnings criteria can fail them. Exclusion means losing institutional / passive-flow access — a negative alpha vector.

Q: Why include Simmtech in the watchlist if it’s not in the final 6? A: Simmtech’s 2026 OP forecast ₩120-150bn is a 10× jump from 2025 ₩11.9bn driven by AI server / memory module substrate mix. The market still treats it as cyclical recovery. If OP clears ₩100bn, it becomes Premium-eligible — a “double re-rating” candidate (earnings inflection + policy flow).

Q: Should one chase or wait? A: Most of the final 6 have already moved meaningfully. Each has a separate entry condition: Silicon2 wants 43,000–45,000 won support or confirmed breakout, Classys wants ~55,000 won support hold, GlobalTaxFree wants 6,000-won basing with sustained turnover. Wait for the trigger; the chase has worse risk-reward.

Q: What changes in June and July that matters? A: June industry briefings and the July KOSDAQ 30th-anniversary event are when Premium-100 final criteria publish. Whether the market-cap threshold is ₩500bn vs higher, whether the OP threshold is ₩30bn vs higher, and what governance grade is required — those details flip individual probabilities. Re-score the candidate list once the criteria are public.

This article is for research and informational purposes only and does not constitute investment advice. Screening data drawn from a proprietary database; financial cut at 2026-05-07, price-and-flow cut at 2026-05-08. Filter 1 (ROE ≥15%, OP growth positive) applied no liquidity / flow / PER constraints — wide-net design. Filter 2 (ROE ≥25%, ₩1bn turnover) and Filter 3 (margin + growth + flow added) layered for compression. KOSDAQ promotion-relegation reform details from Maeil Business Newspaper (2026-05-10), KRX KOSDAQ Global Segment operational rules, and FSC press releases. Premium-tier final criteria are not yet finalized — list, criteria, and timeline subject to change. APR (KOSPI 278470) and Cosmax (KOSPI 192820) are KOSPI-listed and not direct beneficiaries of the KOSDAQ reform. Individual-name judgments are analytical inferences and may be wrong. Data cut: May 10, 2026 KST.

Disclaimer: For research and information purposes only. Not investment advice. Names cited are for analytical illustration; readers should perform their own due diligence and consult licensed advisors before any investment decision.