South Korea's small- and medium-cap stocks are delivering higher returns to investors than their large-cap peers as they emerged as alternatives to beaten-down larger counterparts whose share prices are slumping on grim earnings outlook, data showed Sunday.
According to the data compiled by the Korea Exchange, a sub-index tracking shares ranked below 300 in terms of market capitalization stood at 1,738 points on Friday, the highest-ever level on record. The index has renewed its record high since Wednesday.
Last week alone, the index gained 4.54 percent, eclipsing a 0.59-percent rise of a similar index for large caps.
So far this year, the index for small-cap shares has basked in the glory of a whopping 23.6 percent return, compared with a 1.7 percent decline in the index for large peers, according to the data.
"Investors are tempted to find alternatives to large-cap stocks that are growingly facing a downgrade in their earnings outlook," said Lee Kyong-min, an analyst at Daishin Securities. "Investors are also selling large-cap shares on fund redemption."
Another index gauging stocks ranked between 100th and 300th in terms of market capitalization rose 0.34 percent to stand at 2,248.45 points on Friday, the highest since June 3 of last year when the comparable figure was 2,250.92 points. Last week alone, the index climbed 2.9 percent.
"Small- and mid-cap shares are relatively free from earnings outlooks," said Kim Yong-ku, an analyst at Samsung Securities. "Some domestic-focused stocks, construction for one, and IT shares have risen on expectations that they would benefit from a policy shift."
Analysts said investors' growing appetite for small- and mid-cap shares are also driven by their much-hoped reward for higher risks.
Backed by their stellar performance, the country's secondary market, the Kosdaq, also extended its winning streak to seven consecutive days on Friday, gaining 4.04 percent last week, according to the data.