The South Korean stock market achieved a historic milestone this week as the Kospi index crossed the 5,000-point mark for the first time ever. The index reached this peak on Thursday before closing slightly lower at 4,952.53. This surge represents a nearly 20% gain for January 2026, a rally largely powered by explosive growth in semiconductor stocks and significant corporate governance reforms championed by President Lee Jae Myung's administration.
The primary drivers of the index's record run were the nation's chipmaking behemoths, Samsung Electronics and SK Hynix. These companies, central to the global artificial intelligence (AI) chip frenzy, have seen their valuations skyrocket. Samsung's stock has nearly tripled from last year, trading at ₩154,700, while SK Hynix has been even hotter, climbing almost fourfold to ₩766,000. Together, these two giants now constitute more than a third of the entire Kospi index's weighting.
President Lee, who had promised voters to get the Kospi to 5,000 during his term, has aggressively pursued policies to dismantle the so-called "Korea discount." This term refers to the historical undervaluation of Korean stocks due to investor wariness of family-controlled conglomerates, or chaebols, dominating corporate decision-making. A key reform was enacted in July 2025, amending the Commercial Act to legally obligate company directors to consider the interests of all shareholders, not just insiders or the company itself.
The government is pushing further with plans to cancel treasury shares—stock held by companies themselves, often used to entrench insider control. Eliminating these shares would boost earnings per share and shift more control to outside investors. Additionally, the administration is using tax incentives to encourage higher dividend payouts, which have traditionally lagged behind global peers.
Despite the market euphoria, the rally had a notable absentee: Korean retail investors, colloquially known as "ants." Data from the Korea Exchange shows retail investors were net sellers throughout the past year, missing the bulk of the gains as institutional and foreign capital led the charge. Some non-chip stocks also participated, with Samsung SDI (batteries) jumping 18.67% and industrial group Doosan climbing 9.09%.
The stock market's performance starkly contrasts with the real economy. South Korea's GDP contracted by 0.3% in the fourth quarter of 2025, the worst quarterly reading since 2022. Full-year growth for 2025 was a meager 1%, the weakest since the pandemic year of 2020. Meanwhile, other regional markets saw positive moves, with Japan's Nikkei 225 rising 1.73% to break a five-day losing streak, and Australia's ASX 200 gaining 0.75%.
