How the KOSPI/KOSDAQ Stock Indices Are Calculated

The Korea Exchange's stock markets consist of the KOSPI market, the KOSDAQ market and the KONEX market.
Since trading on the KONEX market is not active, we will look only at the main markets, KOSPI and KOSDAQ

The KOSPI market opened in 1956 as the Seoul Stock Exchange and was later renamed the KOSPI market in 1980.
Most companies listed on the KOSPI market are large companies with stable financial structures, and to be listed on the KOSPI market, a company must meet correspondingly strict requirements.
Most large companies, including Korea's leading companies such as Samsung Electronics, SK hynix and LG Energy Solution, are listed and traded on the KOSPI market. That is why institutional and foreign investors invest most of their funds in the KOSPI market.
The market capitalization of the KOSPI market is about 2,340 trillion won. This is small compared with the U.S. Nasdaq market's 35 trillion dollars (about 50 quadrillion won), but it can be considered a market ranked in the global top 10.

The KOSPI index is calculated on a total market capitalization basis.
KOSPI index = (current market capitalization ÷ base market capitalization) x 100
Base market capitalization = market capitalization on the first day of listing
Let's take an example. Suppose a newly opened market has only 5 stocks. If the total market capitalization of the 5 stocks is 10 million won, the index for the 5 stocks on the first day is calculated as (10 million won ÷ 10 million won) x 100, making the index 100.
Here, . If the prices of the 5 stocks later change and their combined market capitalization becomes 12 million won, the index is calculated as (12 million won ÷ 10 million won) x 100, which is 120. Through this calculation, the index changes every day.
What happens if a new stock is added while the index is at 120? If the new stock's market capitalization is 3 million won, the market capitalization has increased, but before the market opens on the day the new stock is listed, the index stays at 120. Therefore, the formula is set as (12 million won + 3 million won) ÷ (10 million won + adjustment amount) = 120, an adjustment amount is inserted into the calculation, and the value calculated at this point is used for the next index calculation.

The KOSDAQ market is a market centered on technology stocks, established in 1996 by benchmarking the U.S. Nasdaq market. Since the market was established to operate around Korea's small and mid-sized technology stocks, it has many high-quality small and mid-sized companies in technology fields such as IT, biotech and secondary batteries.
Its market capitalization is about 333 trillion won, and its size is still small compared with the KOSPI market. Although the KOSDAQ market was created for the growth of technology stocks, institutional and foreign funds do not flow into it as a priority compared with the KOSPI market. Because of this drawback, many companies that were listed on the KOSDAQ and grew larger move to the KOSPI. This is because moving to the KOSPI improves a company's creditworthiness and the flow of investment funds. For the KOSDAQ market to grow, it seems these problems need to be resolved first.
The KOSDAQ index is also calculated using the total market capitalization method like the KOSPI market, and the calculation method is the same.
Unlike the KOSPI market, it is a market with many small and medium-sized companies, so stock price fluctuations tend to be larger than in the KOSPI market. Accordingly, a bit more risk management is needed compared with blue-chip KOSPI stocks.
We hope that technology stocks in the KOSDAQ market grow like those in the U.S. Nasdaq market and come to stand on equal footing with the KOSPI market.