The KOSPI rose 75% throughout 2025, making it the best-performing major stock index in the world and delivering its strongest annual performance since 1999. Entering 2026, the index broke above the 5,000-point mark in January and surpassed 6,000 points in February. Year-to-date, the KOSPI has gained approximately 100%, making it one of the strongest-performing major equity indices globally.

What Has Been Driving This Rally?

Samsung Electronics and SK Hynix have been the core engines behind this year’s rally. SK Hynix has risen approximately 250% year-to-date, pushing its market capitalization above US$1 trillion. Samsung Electronics also crossed the trillion-dollar threshold earlier this year. Together, the two companies account for more than 40% of the KOSPI’s total weighting.

The core business of both companies is High Bandwidth Memory (HBM) chips. Demand for HBM, driven by AI model training and inference, remains both essential and rapidly growing. Memory-chip manufacturers such as Samsung and SK Hynix now represent roughly half of the KOSPI’s total weighting and have contributed approximately 70% of the index’s gains since the beginning of 2026. In essence, the KOSPI has evolved into a leveraged bet on the AI boom. Goldman Sachs forecasts that South Korea’s earnings-per-share growth will reach 300% in 2026, representing the strongest annual earnings expansion in any Asian market since the recovery following the 1999 Asian Financial Crisis.

Another lesser-known factor is that the logic behind the traditional “Korea Discount” is beginning to change. South Korean equities have long been associated with the “Korea Discount,” not because of a lack of quality companies, but due to low dividend payouts, opaque chaebol governance structures, and insufficient protection for minority shareholders. These factors have historically caused international investors to apply a valuation discount to Korean stocks. Since taking office, Lee Jae-myung’s administration has made addressing these issues a clear policy objective. On February 25, 2026, South Korea’s National Assembly passed the third round of amendments to the Commercial Act, which officially took effect on March 6. The reforms introduced mandatory treasury-share cancellation requirements and strengthened the associated regulatory framework.

Regarding dividend taxation, the government revised corporate tax rules in February 2026, requiring high-dividend companies to disclose “value enhancement plans” in order to continue receiving tax incentives. Companies participating in the value enhancement program now account for nearly 90% of total dividends paid by listed South Korean firms and distribute approximately half of their profits back to shareholders on average. At the same time, South Korea is actively pursuing re-entry onto the MSCI Developed Markets Watch List. Related initiatives include the introduction of a 24-hour foreign exchange market, offshore settlement mechanisms, and simplified reporting requirements.

Today’s Press Conference: What New Signals Did Lee Jae-myung Deliver?

This morning, Lee Jae-myung held a press conference at the Blue House State Guest House to mark the first anniversary of his presidency. Approximately 160 domestic and international journalists attended. The event was held under the theme:

“An Indispensable Korea.”

This was his fourth press conference since taking office.

On economic and market-related topics, Lee delivered two key messages.

Lee explicitly stated that excess tax revenue generated by the semiconductor industry should be used to enhance South Korea’s long-term growth potential rather than being distributed directly to workers.

He stated:

“This money should be invested in areas that can increase South Korea’s growth potential — that means discovering new growth engines like semiconductors.”

He also noted that the government should be willing to make large-scale investments in areas that private companies are unable to develop independently but are critical to the nation’s future.

A Growth Strategy Beyond Semiconductors

Lee pledged that the government will launch a large-scale investment plan supporting a broader range of future growth engines rather than relying solely on semiconductors.

He stated that the government would:

“Mobilize all government and private-sector resources to establish absolute competitiveness in advanced technologies.”

These two statements directly address what many investors consider the largest structural vulnerability in the current Korean equity rally — excessive concentration in just two companies.

The signal Lee delivered today was clear: the government intends to actively broaden South Korea’s industrial base through policy support, thereby providing a wider foundation for future market gains.

What Risks Should Investors Watch?

On June 5, the KOSPI suffered its sharpest single-day correction of the year. The market triggered a circuit breaker and ultimately closed down 5.54%, while Samsung Electronics fell more than 6% and SK Hynix plunged nearly 10%.

The trigger was relatively minor: Broadcom’s sales guidance came in roughly US$1.2 billion below the most aggressive market expectations.

This episode highlighted the most important structural vulnerability of the current rally. South Korea now has approximately 102 million active trading accounts. Margin balances have reached a record high of KRW 36.47 trillion. The market has also introduced single-stock 2x leveraged ETFs. The sheer scale of retail leverage means that any negative news could trigger disproportionately large market swings.

BTIG Chief Market Technician Jonathan Krinsky also pointed out that although the KOSPI gained 12.15% over a six-trading-day period in early June, market breadth was negative on every one of those six days. In other words, the index was rising, but the number of stocks participating in the rally was limited. This is a sign that the market’s gains are becoming increasingly concentrated and may not be as healthy as headline index performance suggests.