New Delhi. While the stock markets of the world are swinging between ups and downs this year, there is one country whose stock market is galloping. This country is not America, not China, not Japan but South Korea. South Korea’s KOSPI destroyed every record this year. Till now there has been a rise of 61 percent in Kospi. America’s S&P has been able to gain 12 percent during this period while India’s Sensex has been able to gain only 8 percent. The stock markets of Japan and China will also not fluctuate near those of South Korea in the year 2025.
This rally in South Korea’s stock market is also special because last year there was a lot of political turmoil in the country and even martial law was implemented. The South Korean market has been teased by the name of ‘Korea Discount’ and was suffering from low valuations for years. But no one had thought that in 2025, the world’s most explosive, fastest and most shocking stock market rally would start from here.
Everything lags behind Korea
According to a Bloomberg report, Kospi started the year around 2,400 points and is now trading around 4000 points after rising 61%. This pace has emerged as the biggest annual growth in the last 25 years. No big index in the world is able to match Korea at this time. US indexes are rising slowly, Europe is stable, China is struggling.
Why did it happen so fast?
There are two main reasons for the rise in the Korean stock market. First, the boom of AI and second, large-scale corporate reforms. President Lee Jae-myong had promised to raise the index to 5,000. Such political determination to set targets for the stock market is rarely seen. This move by Lee gave the market a direction and confidence that was never seen before. The government also aims to attract money from sectors like real estate and bring it into the market. An example of how serious the government is about strengthening the equity market is that a top financial regulator official sold one of his two apartments and bought ETFs with the proceeds.
Nvidia showed the world the AI revolution. Korea has taken real advantage of this. That’s because the world’s most important memory chips, which run AI models, heat servers and power data centers, are made in large part by Korean companies Samsung Electronics and SK Hynix. The orders of these companies are going to skyrocket in 2025. Demand grew so much that analysts named it “Supercycle”. Korean chip companies still look cheap by global standards. Nvidia is trading at 27 times earnings, while SK Hynix is trading at only 7 times. This cheapness attracted foreign investors and KOSPI kept jumping from jump to jump.
Will the rise continue?
The speed with which the Korean stock market has risen has surprised even the big banks and policy makers of Wall Street. At the same time, questions are also being raised whether this momentum will be sustainable, especially when a major part of this year’s growth has come on the strength of Samsung Electronics and SK Hynix. There is increasing concern about the expensive valuations of AI related companies. The future trend of the market will largely depend on how much big companies adopt governance reforms and how serious the government is in taking them forward.
“We are not in a position to take a very overweight position,” says Sam Conrad, who manages $2.8 billion at Singapore-based Jupiter Fund Management. Foreign investors have started selling again in November, which could become one of the biggest outflow months this year. Jonathan Pines, portfolio manager of Federated Hermes, says that at the global level, Korean stocks are still cheap. If the valuation discount disappears, the market could double or even triple. Corporate governance reforms will be crucial for the next phase of the rally.
Kim Dojoon, CIO of Zion Investment Management, says, “Ultimately, the KOSPI’s target of 5,000 points hinges on how many steps companies take to increase returns to shareholders and strengthen the market. If the pace continues like this, the index could touch 5,000, but there is a possibility of falling back after that.”
