Promotion-Relegation System on Korea Invest Insights

KOSDAQ Series Part 2 — Screening for Quality with ROE: 1,820 → 105 → 35 → 6. The 0.3% That Combines High ROE, Margin, Growth, and Flow

Sun, 10 May 2026 22:30:00 +0900

📚 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.)

Group	Names passing
All Korean listed	173
KOSDAQ	105
KOSPI	68

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:

Name	Ticker	ROE	OP growth	OP margin	PER	20D price	20D F+I net buy
Sunic System	171090	101.5%	+1,311%	21.6%	5.2×	+7%	-₩39.6bn
Hanpass	408470	94.2%	+58%	12.4%	—	-22%	-₩5.5bn
Genic	123330	59.8%	+150%	19.1%	7.0×	-14%	-₩14.6bn
JTC	950170	57.4%	+117%	15.4%	3.3×	+7%	+₩0.3bn
S-Connect	096630	49.8%	+27%	4.8%	1.3×	+390%	-₩1.1bn
Silicon2	257720	46.9%	+49%	18.4%	14.8×	+9%	+₩58.6bn
Sungho Electronics	043260	46.3%	+21%	3.3%	6.9×	+3%	-₩4.0bn
ITCEN Global	124500	45.9%	+378%	3.2%	15.1×	+20%	-₩6.7bn
BHI	083650	44.4%	+245%	9.8%	24.8×	0%	-₩141.4bn
SM Entertainment	041510	41.6%	+110%	15.6%	8.9×	+6%	-₩0.9bn
Inca Financial Service	211050	39.7%	+10%	9.3%	9.1×	-12%	₩0bn
Alteogen	196170	39.4%	+321%	49.5%	170.7×	-9%	+₩20.6bn
Wooone Construction	046940	36.8%	+2,300%	17.9%	1.3×	+23%	-₩2.1bn
Inzisoft	100030	35.1%	+109%	12.4%	3.1×	+17%	₩0bn
Dong-Ah Eltec	088130	33.6%	+670%	19.4%	1.4×	+41%	-₩12.7bn
KONA I	052400	32.6%	+166%	28.8%	8.9×	+7%	+₩7.5bn
KNJ	272110	30.8%	+57%	26.3%	6.8×	+11%	-₩0.9bn
Easy Bio	353810	29.1%	+39%	9.4%	7.0×	+4%	+₩1.7bn
Global Tax Free	204620	27.8%	+34%	18.8%	9.1×	+20%	+₩6.4bn
Mico	059090	27.2%	+7%	10.3%	15.2×	+72%	+₩29.4bn
PharmaResearch	214450	26.9%	+70%	40.0%	28.4×	+16%	-₩21.9bn
Classys	214150	26.2%	+39%	50.6%	27.1×	+5%	+₩11.2bn
Leeno Industrial	058470	22.4%	+43%	47.5%	30.2×	-4%	-₩80.5bn
Jeju Semiconductor	080220	19.2%	+274%	11.9%	23.0×	+27%	+₩116.0bn
Dawonnexview	323350	20.4%	+208%	15.0%	11.9×	+96%	+₩2.3bn
Vitzro Cell	082920	18.6%	+34%	28.5%	14.0×	+52%	-₩5.0bn
iNet	462980	18.4%	+725%	8.5%	14.7×	-10%	-₩0.1bn

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

Name	ROE	Margin	OP growth	PER	PBR
Silicon2	46.9%	18.4%	+49.3%	14.8×	5.5×
Alteogen	39.4%	49.5%	+320.9%	170.7×	54.4×
KONA I	32.6%	28.8%	+166.2%	8.9×	2.5×
KNJ	30.8%	26.3%	+57.4%	6.8×	1.8×
Easy Bio	29.1%	9.4%	+38.9%	7.0×	1.8×
Global Tax Free	27.8%	18.8%	+34.3%	9.1×	2.3×
Mico	27.2%	10.3%	+6.8%	15.2×	3.7×
PharmaResearch	26.9%	40.0%	+70.0%	28.4×	6.8×
Classys	26.2%	50.7%	+39.4%	27.1×	6.4×
VT	25.7%	19.0%	-25.2%	10.2×	2.5×

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:

Name	Market cap	Estimated 2026E NI	Implied PER	Risk
Ecopro BM	₩23tn+	~tens of ₩bn	~596×	May fail Premium criteria
ABL Bio	#9 by cap	-₩48.6bn (loss)	n/m	May fail earnings criterion
Robotis	₩5tn	~₩10bn	~390×	Cap excessive vs earnings

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

Name	ROE	Premium probability	Reason
Silicon2	46.9%	High	All four (ROE / margin / growth / flow) clean
Classys	26.2%	High	Margin 50%+, stable profitability
Global Tax Free	27.8%	Medium	Cap and earnings size verification needed
Easy Bio	29.1%	Medium → High	Visible 2026 OP at ~₩50bn level should clear
KNJ	30.8%	Medium	Earnings size and cap thresholds need verification
PharmaResearch	26.9%	High	Margin 40%, stable profitability

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

Priority	Name	Character	Verdict	Trigger
1	Silicon2	High-ROE growth	Pullback buy #1	43,000–45,000 won support OR confirmed new-high breakout
2	Classys	High-margin device	Buy on support	~55,000 won support hold
3	Simmtech	Earnings inflection + Premium catalyst	Buy on confirmation	2Q26 OP path ≥₩50bn confirmed
4	Easy Bio	Cheap high-ROE value	Value candidate	1Q26 OPM ≥9.4% confirmed
5	Leeno Industrial	Stable inclusion candidate	Wait for pullback	15–20% retracement
6	Global Tax Free	Cheap high-ROE	Conditional buy	6,000-won base + sustained turnover

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.

KOSDAQ Complete Guide for Foreign Investors — 1,820 Listed Companies, About to Be Sliced Into a 3-Tier League. October 2026 Promotion / Relegation Reform Could Finally Open the Pension-Capital Tap

Sun, 10 May 2026 11:00:00 +0900

📚 KOSDAQ Series — Part 1. Continue with: Part 2 — Screening for Quality with ROE: 1,820 → 105 → 35 → 6

While KOSPI breached 7,500 and printed an all-time market-cap high, KOSDAQ has been oscillating around the 1,200 line. YTD 2026 the small-cap board is +30% — not bad in absolute terms, ahead of Turkey, Japan, and Brazil — but less than half of KOSPI’s +75%. The retail-investor complaint is by now familiar: “KOSDAQ doesn’t go up when KOSPI goes up, and goes down when KOSPI goes down.” Underneath the relative-performance frustration, however, the structural change worth tracking has finally surfaced: a promotion-relegation system that splits all ~1,820 KOSDAQ-listed companies into Premium (Tier 1, ≤100 names), Standard (Tier 2), and Watch (Tier 3) segments, with movement between tiers based on earnings and governance. The reform launches as early as October 2026. The point is not to publish another curated list — the 2022 KOSDAQ Global Index already proved the curation worked but the money didn’t follow. This time the design must build the buy-side plumbing too.

TL;DR

What KOSDAQ is. Korea’s growth-equity board, launched in 1996 as a NASDAQ analog. ~1,820 listed companies. Dominated by biotech, semiconductor equipment, gaming, beauty, robotics, battery-materials. The “next-generation Samsung Electronics” tends to start its public-market life here.
Up +30% YTD but overshadowed. That print beats Turkey (+29%), Japan (+18%), Brazil (+16%). But against KOSPI +75%, it reads as relative underperformance — KOSPI’s rally was that large, not because KOSDAQ collapsed.
A 25-year breakout. April 24, 2026 closed at 1,203.84 — the first close above 1,200 since the dot-com peak in March 2000. Driven by breadth (semiconductor-equipment, biotech, robotics, batteries) rather than a single-theme rip.
The reform that matters: October 2026 promotion-relegation. All ~1,820 listed names get split into Premium (≤100), Standard, and Watch. Earnings-based promotion and relegation. The intent: build the institutional plumbing (premium-segment ETFs, NPS benchmark inclusion, ₩6tn People’s Growth Fund) so passive and pension capital have forced exposure to the curated top tier rather than optional.
The legacy problem the reform is trying to fix. KOSDAQ’s index-level top names skew toward names with elevated multiples and unproven earnings — Ecopro BM at PER ~596×, LegoChem Bio at ~286×, Robotis at ~390×, ABL Bio loss-making but at #9 by market cap. A KOSDAQ150 mechanically tilted toward unprofitable names is exactly the kind of benchmark institutions cannot underwrite.
Premium-segment success requires actual buy demand, not just the list. The 2022 KOSDAQ Global Index returned +160% vs. KOSDAQ broad +65% — proving curation works. But it never became a pension benchmark or an ETF magnet. The October reform must avoid that trap.
Why this matters at the name level. Stocks already covered in our prior posts that sit on KOSDAQ — ISU Petasys (substrate stack), OE Solutions (CPO), APR (beauty), Easy Bio (feed-additive platform) — see different forward valuations depending on Premium-tier inclusion. Inclusion = passive flow + NPS attention + liquidity uplift. Exclusion = retail-flow status quo.

1. What KOSDAQ Is — for foreign investors arriving fresh

1.1 Korea’s “second exchange”

Item	KOSPI	KOSDAQ
Character	Large-cap, blue-chip	Growth, innovation
Launched	1956	1996
Listed companies	~950	~1,820
Market cap	~₩6,000tn (8th globally)	~₩673tn
Sector tilt	Semis, autos, financials, energy, shipbuilding	Biotech, semi-equipment, gaming, beauty, robotics
Investor base	Foreign / institutional dominant	Retail dominant (64% of trading volume)
Volatility	Lower	Higher
Index base	1980-01-04 = 100	1996-07-01 = 1,000
Flagship index	KOSPI 200	KOSDAQ 150

KOSPI is the home of Samsung Electronics, SK hynix, Hyundai Motor. KOSDAQ is where the next generation lives. Mapped to the U.S., KOSPI ≈ NYSE and KOSDAQ ≈ NASDAQ.

1.2 The name and the original mission

KOSDAQ stands for Korea Securities Dealers Automated Quotation — a deliberate echo of NASDAQ. The launch mandate was to give SMEs, ventures, and tech companies an equity-funding path that KOSPI’s stricter listing thresholds wouldn’t allow. The Financial Services Commission still describes KOSDAQ as “the core infrastructure of Korea’s innovation and venture ecosystem.”

1.3 KOSDAQ vs. NASDAQ — where they diverge

Item	U.S. NASDAQ	Korea KOSDAQ
Market cap	~$29tn (#1 globally)	~₩673tn (~$500bn)
Flagship names	Apple, Nvidia, Microsoft	Alteogen, Ecopro BM, HLB, Leeno Industrial
Institutional weight	High	Low (retail = 64% volume)
Hosts mega-caps?	Yes (Apple ~$4tn cap)	No (large-caps migrate to KOSPI)
Market perception	“World’s leading tech-stock board”	“Volatile, sometimes speculative”

The single most important divergence: NASDAQ keeps Apple and Nvidia. KOSDAQ loses its winners to KOSPI. 54 companies have transferred from KOSDAQ to KOSPI since launch; the 48 still listed today have a combined market cap of ~₩218tn — more than 30% of KOSDAQ’s entire market cap. The structural weakness is built in: the best-performing companies leave the board. Closing this leak is one of the explicit goals of the October promotion-relegation reform.

2. KOSDAQ’s 30 years — boom, collapse, and a 25-year recovery

2.1 Compressed history

1996.07: Launched at 1,000
1997-1998: Asian financial crisis collapse
2000.03: 2,834 ← all-time high (dot-com peak; not yet broken)
2000.12: 525 ← bubble burst, -80%
2001-2019: Range-bound 400-900 — the "lost two decades"
2020: COVID-low rebound, retail-investor onboarding wave
2022-2024: Rate hikes, capital-gains-tax debate, drift back to 600-800
2025 H2: Government KOSDAQ-revitalization program
2026.01.26: Reclaims 1,000
2026.04.24: Closes at 1,203.84 → first 1,200+ close in 25 years
2026.05: Oscillating around 1,200

2.2 Why the 25-year breakout matters

KOSDAQ has approached 1,200 multiple times and failed each time. The April 2026 break is different because the move was driven by breadth — semiconductor materials/equipment, biotech, robotics, and batteries simultaneously — rather than a single thematic rip.

The relative gap to KOSPI is real and hurts perception. On May 6, KOSPI surged +447 points (+6.5%) and broke 7,000 — KOSDAQ closed -0.3% the same session. “Doesn’t rally with KOSPI, sells off with KOSPI” is the retail complaint that crystallized.

But KOSDAQ +30% YTD is genuinely not bad in absolute terms — it’s ahead of Turkey (+29%), Japan (+18%), Brazil (+16%). The relative softness is a function of KOSPI’s outsized rally, not KOSDAQ deterioration. Why Korea Part 4 covers the $6.7bn foreign ETF inflow that overwhelmingly went to Samsung Electronics and SK hynix — i.e., to KOSPI, not to KOSDAQ. The October reform is one of the explicit channels for redirecting that capital.

3. What’s actually inside KOSDAQ — by sector

3.1 Biotech / pharma — the biggest segment

Most of KOSDAQ’s index-cap top sits in biotech. Korea has begun building real strength in biosimilars, antibody-drug conjugates (ADCs), and cell-and-gene therapy.

Alteogen — subcutaneous-injection drug-delivery platform, licensed to global pharma. Among the largest names in KOSDAQ by market cap.
LegoChem Biosciences — ADC platform with multiple large licensing deals.
ABL Bio — bispecific antibodies. ~#9 by market cap despite a projected ₩48.6bn loss this year.
Kolon TissueGene — gene therapy for osteoarthritis.

The sector is KOSDAQ’s biggest strength and its biggest volatility source. Names move +100% on trial reads and -50% on accounting issues. SamCheonDang Pharmaceutical hit #1 in KOSDAQ market cap at a ₩1.23m share price in March 2026, then collapsed below ₩400k after disclosure-failure designations — a textbook KOSDAQ episode.

3.2 Semiconductor equipment / materials — the AI second derivative

If KOSPI hosts Samsung Electronics and SK hynix, KOSDAQ hosts most of their suppliers.

Jusung Engineering — semiconductor and display deposition equipment.
Wonik IPS — wafer-process equipment.
Leeno Industrial — test sockets and probe pins, leading global market share.
Hanmi Semiconductor — back-end equipment with HBM exposure (a key 2025-2026 AI beneficiary).
ISU Petasys — high-layer-count PCBs for AI servers and switches. Covered in Korea AI PCB Ecosystem: 10 Companies.
OE Solutions — optical transceivers and laser chips, with CPO-related external-light-source products. Covered in Korea Optical / CPO Value Chain — 7 Companies.

This is the segment doing most of the heavy lifting in 2026’s KOSDAQ rally.

3.3 Gaming, beauty, robotics, batteries — the cluster names

Gaming: Pearl Abyss (Black Desert / Crimson Desert global MMORPGs), Wemade, Com2uS, Kakao Games.
Beauty: Classys (medical aesthetics devices, HIFU), PharmaResearch (Rejuran PN skin booster, polynucleotide platform), Silicon2 (global K-beauty distribution platform), Englewood Lab (US-market beauty ODM). See Why Korea Part 2 — Korean Cosmetics for the ecosystem context. Note: APR (KOSPI 278470) and Cosmax (KOSPI 192820) — both well-known Korean beauty names — are KOSPI-listed and outside the scope of this KOSDAQ guide.
Robotics: Rainbow Robotics (bipedal humanoid with Samsung Electronics as strategic investor).
Battery materials: Ecopro BM (cathodes, near top of KOSDAQ market cap, projected PER ~596×).

4. Why KOSDAQ has carried a “casino-board” reputation

4.1 Top-of-cap names with unverified earnings

The Maeil Business Newspaper framing is sharp: KOSDAQ’s highest-market-cap tier is dominated by names with elevated multiples and unproven earnings.

Name	Market cap	2026E net income	Implied PER
Ecopro BM	₩23tn+	Tens of ₩bn	~596×
LegoChem Bio	₩7tn+	~₩40bn	~286×
Robotis	₩5tn	~₩10bn	~390×
ABL Bio	#9 by market cap	-₩48.6bn (loss)	n/m

High multiples on growth names are not, in themselves, a problem — NASDAQ also hosts loss-making names at the cap top. The actual issue is structural: when index methodology elevates unverified-earnings names into KOSDAQ 150, the benchmark itself becomes uninvestable for institutions whose mandates require profitability filters.

4.2 The KOSDAQ 150 design problem

KOSDAQ 150 selects on free-float market cap and trading volume. Under that filter, unprofitable thematic names (battery-materials, biotech, robotics) with inflated caps from expectation alone end up in the index ahead of profitable mid-caps with stable earnings. Pension funds running KOSDAQ 150 as a benchmark are then forced to underwrite that mix. They mostly choose not to.

4.3 The good companies leave for KOSPI

KOSDAQ’s most-successful graduates transfer up to KOSPI to access deeper institutional and foreign liquidity, plus larger passive pools. 54 companies have made that move; the 48 still listed today carry ~₩218tn of market cap — over 30% of KOSDAQ’s total. The board’s structural weakness is that its winners exit.

5. The October Reform — a 3-tier league with promotion and relegation

5.1 What changes

From October 2026 (or as soon as feasible), KOSDAQ’s ~1,820 listed companies get sorted into three tiers:

Premium (Tier 1):
- ≤100 companies
- Selection on financial soundness, growth, governance
- Designed as the destination for pension and passive flows
- New dedicated index + ETF products

Standard (Tier 2):
- Mid- and small-caps below the Premium threshold
- Separate index and ETF products under consideration
- Provides depth, mitigates Premium-only flow concentration

Watch (Tier 3):
- Distressed / problem names
- Accelerated delisting pathway

The promotion-relegation logic is direct: companies move between tiers based on earnings and governance metrics. Same idea as football-league relegation, applied to capital markets.

5.2 Why this matters — “a good list” ≠ “a list institutions must own”

A market-participant quote captures the design lesson:

“We made a list of good companies, but we never built a structure that forces investors to actually own them.”

That refers to the 2022 KOSDAQ Global Index: ~50 selected names, +160% return since launch (vs. KOSDAQ broad +65% same period). The curation worked. The flow didn’t. ETFs tracking the Global Index stayed small. NPS never adopted it as a core benchmark. The October reform’s design intent is to fix that — move beyond curation and build the institutional flow architecture into the system itself.

5.3 Specifically, what flow channels open

1. Premium-index passive flow. A dedicated Premium index becomes the underlying for new ETFs. Passive AUM mechanically buys the Premium 100 — separate from existing KOSDAQ 150 passive demand.

2. NPS benchmark inclusion. If the National Pension Service’s domestic-equity benchmark begins to assign weight to KOSDAQ (per reform discussions, ~5%), then funds and external managers ignoring KOSDAQ underperform their benchmark. “Not buying” becomes a relative-performance penalty rather than a neutral choice.

3. People’s Growth Fund. A ₩150tn (5-year) People’s Growth Fund is being aligned with KOSDAQ. Of the ₩30tn scheduled this year, ₩10tn flows into equity / indirect investment, including special-listing tech companies and pre-listing KOSDAQ pipeline. The ₩600bn People’s Participating subfund launching May 22 carries a minimum 10% (₩60bn) allocation requirement to KOSDAQ tech-special-listing names.

5.4 The “stop the leak to KOSPI” effect

If Premium-tier names can access pension money and passive flows while staying on KOSDAQ, the incentive to transfer up to KOSPI weakens. The structural leak that has cost KOSDAQ its winners for 25 years could finally be plugged.

5.5 Timeline

Now: Korea Capital Market Institute (KCMI) finalizing detail design
June: Market-participant briefings, public comment
July: KOSDAQ 30th-anniversary event — formal disclosure of the reform framework
October (target): Reform goes live

6. The ratio that matters — 50 well-chosen names vs. the broad index

6.1 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%

Same period:
KOSDAQ broad (\~1,800 names): +65%
KOSDAQ 150 (150 names): +93%
KOSDAQ Global (\~50 names): +160%

The selection-method matters more than KOSDAQ-the-asset-class. Choosing 50 well-screened names returned ~2.5× the broad index. “KOSDAQ doesn’t work” is the wrong framing. “Which KOSDAQ names you own” is the question.

6.2 Premium selection must be earnings-based, not just cap-based

The legacy KOSDAQ 150 was effectively cap-and-volume. That filter inevitably promoted unverified-earnings names — Ecopro BM at PER ~596×, ABL Bio loss-making, Robotis at PER ~390×. The Premium-tier brief explicitly cites financial soundness and growth as the selection criteria. If the implementation actually screens out cap-only names, the resulting benchmark is institutionally underwriteable in a way KOSDAQ 150 has never been.

7. Why this matters for the names we already cover

7.1 KOSDAQ-listed names from our prior posts

ISU Petasys — covered in Korea AI PCB Ecosystem: 10 Companies.
OE Solutions — covered in Korea Optical / CPO Value Chain — 7 Companies.
Easy Bio — covered in Part 1 and Part 2.
Silicon2 / Pamicell — covered in the ROE-25% screen.

For each of these, Premium-tier inclusion is a non-trivial valuation variable.

If included:

Mechanical passive-fund inflow via Premium-index ETFs
NPS-benchmark consideration
Liquidity-tier improvement
Multiple-rerating optionality on the back of cleaner buy-side access

If not included:

Retail-flow regime continues
Institutional access remains gated

7.2 The variables to track from October

The Premium 100 list itself — earnings-based or cap-based? The single most important reveal.
ETF launch pace and AUM — does Premium-index passive AUM reach a meaningful scale?
NPS benchmark adoption — does KOSDAQ actually enter the pension benchmark?
People’s Growth Fund deployment — does the ₩600bn participating subfund meaningfully invest in KOSDAQ tech names?
KOSPI transfer activity — do Premium-tier names stop migrating up to KOSPI?

8. Risks that could neutralize the reform

8.1 “List changes, money doesn’t”

The 2022 KOSDAQ Global Index outcome could repeat. Premium list curated, ETFs launched, but AUM stays small and NPS doesn’t adopt it as a benchmark. Without the institutional pull, capital-flow patterns don’t shift.

8.2 Thematic volatility persists

The reform doesn’t lower KOSDAQ volatility per se. Among the ~1,720 non-Premium names, retail-driven theme rallies and crashes will continue. The “KOSDAQ is risky” perception doesn’t dissolve overnight.

8.3 Diluted Premium criteria

If the Premium tier ends up including loss-making or unverified-earnings names — to satisfy lobbying or political optics — the credibility premise collapses. The criterion has to be earnings, not market cap. Anything else recreates the KOSDAQ 150 problem under a new name.

9. Bottom line

KOSDAQ is a 30-year-old market that still hasn’t recovered its 2,834 dot-com peak. Twenty-five years of “lost market” status. YTD 2026 is +30% with a 1,200 breakout — but KOSPI’s +75% has overshadowed the move and produced more retail frustration than appreciation.

The structural change worth tracking is the October promotion-relegation reform. Splitting ~1,820 listed names into Premium (≤100), Standard, and Watch, with movement based on earnings, is one piece. The piece that matters more is building the institutional plumbing — Premium-index ETFs, NPS-benchmark inclusion, People’s Growth Fund alignment — that forces real flow into the new top tier. If those three pieces work, KOSDAQ-quality names see liquidity and multiple uplift.

The KOSDAQ Global Index already proved the upper bound: 50 well-chosen names returned +160% while the broad index returned +65%. “KOSDAQ doesn’t work” was always the wrong framing. “Which 50 names” was the question. The October reform’s success or failure compresses to two design choices — does the Premium screen prioritize earnings over cap, and does the institutional plumbing actually pull flow.

FAQ

Q: How does KOSDAQ differ from KOSPI for foreign investors? A: KOSPI is large-cap blue-chip (Samsung Electronics, SK hynix, Hyundai Motor, ~950 names); KOSDAQ is growth (biotech, semi-equipment, gaming, robotics, ~1,820 names). U.S. analog: NYSE vs. NASDAQ. KOSDAQ is more volatile and far more retail-dominated.

Q: Who is the largest company on KOSDAQ? A: It rotates frequently. Recently Alteogen, Ecopro BM, HLB, and Leeno Industrial have traded near the top. Because KOSDAQ’s biggest winners migrate to KOSPI (54 names historically — APR and Cosmax are recent examples), KOSDAQ’s “leader” is structurally a newer cohort rather than a stable Apple-equivalent.

Q: Why has KOSDAQ underperformed KOSPI in 2026? A: The $6.7bn YTD foreign ETF flow concentrated in KOSPI mega-caps (Samsung Electronics, SK hynix). KOSDAQ is retail-dominated and pension/foreign access is structurally limited. The October promotion-relegation reform is the explicit attempt to redirect institutional flow into KOSDAQ Premium-tier names.

Q: What does the promotion-relegation system actually do? A: It splits ~1,820 KOSDAQ names into Premium (≤100), Standard, and Watch, with movement between tiers tied to earnings. Combined with new Premium-index ETFs, NPS-benchmark inclusion, and the People’s Growth Fund, the design forces pension and passive capital into the curated top tier. The intent is to break the 25-year leak of KOSDAQ winners to KOSPI.

Q: Which KOSDAQ stocks should I watch around the October reform? A: Focus on profitable mid-caps with sustainable margins — Leeno Industrial, Hanmi Semiconductor, Classys, PharmaResearch, Easy Bio, etc. — that could plausibly meet earnings-based Premium criteria. The list itself is finalized only after October; pre-positioning carries category risk.

Q: What’s the biggest risk that the reform fails? A: The 2022 KOSDAQ Global Index outcome repeating — the Premium list gets curated, ETFs launch but stay small, NPS doesn’t adopt it as a benchmark. Without the buy-side plumbing actually engaging, the new list won’t change flow patterns.

Q: Which KOSDAQ stocks see the largest foreign-investor presence today? A: Names with high foreign-ownership ratios include Alteogen, Leeno Industrial, and HLB. Mostly companies with high overseas-revenue mix, or biotech names with advanced clinical pipelines.

This article is for research and informational purposes only and does not constitute investment advice. Reform-related details rely on Maeil Business Newspaper (2026-05-10, Kim Jung-suk) reporting. KOSDAQ index, market cap, listed-company count, and KOSPI-transfer history sourced from KRX. KOSDAQ Global Index returns from KRX disclosures. KOSDAQ-revitalization policy from FSC (2025-12-19) announcements. KOSDAQ 150 valuation data via FnGuide consensus. Relative-performance and foreign-flow context drawn from Seoul Economic Daily, NewDaily, EBN, and eToday reporting. KB Asset Management’s KOSDAQ Leader fund context from Seoul Economic Daily (2026-05-08). The promotion-relegation reform is not yet finalized — selection criteria, the Premium 100 list, and the launch date may change. Analysis can be wrong. Data cut: May 10, 2026 KST.