Every time geopolitical risks from the Middle East shake the market, the question resurfaces: "Is KOSPI heading back to 'Boxpi'?" But this time, analysts say it's different. While short-term fluctuations may continue, the market's structural level has already moved up a notch.
Volatile Trading, But "Not the Old 3000 Boxpi"
On May 13, KOSPI opened down more than 2% on news that U.S.-Iran ceasefire negotiations had collapsed, but quickly recovered, narrowing its losses. While markets swinging on war, oil prices, and diplomatic variables is familiar, the internal structure of the market has changed from the past, analysts say.
According to a report titled "Conditions for Structural Transformation of the Korean Stock Market" released by Shinhan Future Strategy Research Institute on May 12, the recent KOSPI rally is the result of the government's Value-up (corporate value enhancement) policy combined with an AI-driven semiconductor supercycle.
The report estimates that the Value-up program lifted the KOSPI index by approximately 1,000 points. The price-to-book ratio (PBR) of KOSPI-listed companies rose from 0.85 times before the policy to 1.4 times afterward. Of this increase, the semiconductor sector contributed 0.35 times and the Value-up policy contributed 0.2 times.
"The Value-up policy has structurally raised the floor of the KOSPI index," the institute said. "The likelihood of returning to the previous 1,500-3,000 point trading range is low."
"The Issue Isn't the Rise, But Sustainability"... High Semiconductor Dependency
However, short-term market movements remain sensitive to external variables. On May 13, as of 9:22 a.m., KOSPI traded at 5,784.01, down 74.86 points (1.28%) from the previous session following news of the U.S.-Iran negotiation breakdown, showing volatility as it recovered to the 5,810 level during trading.
This was attributed to dampened investor sentiment after negotiations collapsed over disagreements surrounding the Strait of Hormuz opening and Iran's nuclear issues. Most sectors, including large-cap semiconductors, showed weakness, while only some defense-related sectors that benefit from such situations showed strength.
The report noted that KOSPI not returning to its previous trading range and continuing to rise further are separate issues. It explained that structural conditions must be met for a medium- to long-term upward trend.
Specifically, the key challenges identified were: reducing earnings volatility, establishing a long-term investment culture, and discovering new growth drivers.
Regarding earnings structure, the high dependency on cyclically sensitive sectors such as semiconductors was flagged as a problem. Currently, about 40% of KOSPI operating profits are concentrated in IT and semiconductors, creating a structure where earnings and stock price volatility expand significantly with industry changes. The report analyzed that companies need to diversify their business portfolios and improve their fundamentals by divesting non-core businesses.
In fact, companies that restructured their business portfolios recorded an average stock return of 134.4% from 2019 to 2025, while companies that maintained their existing business structures posted -12.5% over the same period.
"Value-up Raised the 'Floor'... Further Gains Depend on Structure"
Supply and demand structure was also cited as an area needing improvement. According to the report, domestic individual investors hold stocks for an average of only about 9 days, showing a strong tendency toward high-risk, short-term investing. "The short-term trading-focused supply structure is entrenching the structural undervaluation of KOSPI," the institute noted.
Accordingly, the report analyzed that long-term capital inflows through expanded retirement pension reserves and increased performance-based products are needed, along with an expanded role for financial companies.
In terms of growth drivers, industrial structural transformation after semiconductors was presented as a key challenge. The report identified next-generation growth areas including energy (SMR, renewable energy), batteries (solid-state, ESS), automobiles (SDV, autonomous driving), bio (AI drug development), and defense/shipbuilding. It emphasized that financial support must be combined at the early stages of technology and industry to establish a foundation for sustainable growth.
"The domestic stock market cannot avoid volatility from external variables in the short term, but the index floor raised by the Value-up policy is at a different level than before," the institute said. "If corporate fundamental improvements, long-term investment culture, and new growth industry development proceed in parallel, further KOSPI gains and a medium- to long-term upward trend are possible."