The KOSPI broke through 7,000 points for the first time, propelling Korea's capital market to its largest size ever. The KOSPI's market capitalization reached a record high of 6,058 trillion won ($4.4 trillion), and the total market capitalization of Korea's stock market ranked eighth globally. Analysts say Korea's global standing in equity markets has been elevated as a semiconductor industry recovery, strength across key sectors, and capital market reform measures converged.
According to the Korea Exchange (KRX) on Friday, the KOSPI closed at 7,384.56, with an intraday high of 7,426.60. The index crossed the 7,000 threshold roughly two months after first breaking 6,000 on February 25. Over the same period, the KOSPI's market capitalization grew by more than 1,000 trillion won, rising from 5,017 trillion won to an all-time high of 6,058 trillion won. As a result, Korea's stock market capitalization ranked eighth in the world as of the 4th of this month.
The KOSPI has gained 75.2% year-to-date, ranking first among the G20 nations. According to index performance data compiled by the exchange for major G20 countries, Korea was followed by Turkey (28.7%), Japan (18.2%), and Brazil (15.9%).
Semiconductors drove the rally. As expectations for chip earnings grew on the back of expanding global artificial intelligence (AI) investment and rising demand for high-performance memory, the electrical and electronics sector led the market. Semiconductor exports in April reached $31.9 billion, up 173% from a year earlier, maintaining a high level following March's $32.8 billion. The electrical and electronics sector has gained 124.8% this year, significantly outpacing the broader KOSPI.
Foreign investor flows also turned around in April. Foreign investors were net sellers of 21.1 trillion won and 35.9 trillion won in the KOSPI market in February and March, respectively, but shifted to net purchases of 1.1 trillion won in April. In May, net buying expanded to 6.1 trillion won. In the electrical and electronics sector alone, foreigners net-bought 2.3 trillion won in April and 6 trillion won in May.
Buying also spread to sectors beyond semiconductors. As geopolitical tensions, expanding AI demand, and strengthening energy security converged, the construction, machinery and equipment, and transport equipment and parts sectors also posted gains. Year-to-date gains by sector were 129.2% for construction, 78.5% for machinery and equipment, and 39.6% for transport equipment and parts. Analysts say earnings improvement in the upstream and downstream semiconductor industries and strength in key sectors such as defense, shipbuilding, nuclear power, and construction supported the index's rise.
Capital market reform policies are also cited as a backdrop to the re-rating. "The first through third rounds of commercial law revisions established the legal foundation for improving corporate governance, while the implementation of separate taxation on dividend income and expanded tax support for Value-up program leaders have raised expectations for corporate value enhancement and shareholder returns," a KRX official said. The combination of institutional improvements and companies' voluntary compliance has led to improved investor sentiment, according to market observers. However, profit-taking demand following the sharp short-term rally, geopolitical uncertainty surrounding the United States and Iran, and monetary policy variables in major economies are cited as burdens on the index's future trajectory.
