The "chip rally" propelled Korea's stock market past the unprecedented 9,000 mark, but analysts say it has simultaneously left behind challenges for building a sustainable foundation for a "Korea premium." Even as the KOSPI index rises, the number of declining stocks has grown apart from chip shares, widening the gap between the index and individual stocks. Experts diagnosed that rather than relying solely on the chip rally, efforts to enhance corporate value through shareholder returns and solid earnings at individual companies must support sector rotation, in order to build a stable bull market structure beyond reaching KOSPI 10,000.
According to the Korea Exchange (KRX) on Thursday, the KOSPI closed at 9,063.84, up 199.60 points, or 2.25%, from the previous trading session. The index soared as high as 9,100 intraday, defying concerns that market momentum could falter as the U.S. Federal Open Market Committee (FOMC) took a "hawkish" stance favoring monetary tightening.
Leading the market were the top four stocks by market capitalization: Samsung Electronics (4.62%), SK hynix (6.51%), SK Square (6.52%), and Samsung Electro-Mechanics (8.27%). As of Thursday, the four companies accounted for 59.62% of total market capitalization, up 4.27 percentage points from the end of May (55.35%).
It was also evident that the warmth failed to spread across the broader market. On the Korea Exchange's main board, only 109 stocks rose, while 791 declined. Narrowing the view to the top 50 KOSPI stocks by market capitalization, 14 rose and 35 declined. Although the index renewed its all-time high, buying concentrated on large-cap stocks in the semiconductor and artificial intelligence (AI) value chain, which actually deepened the polarization among individual stocks.
Aside from strength in chip shares, intense net buying by retail investors is cited as a driving force behind the break above 9,000. Retail investors bought 16.2043 trillion won worth this month alone, overwhelmingly outpacing institutions (3.5567 trillion won). This contrasts with foreign investors, who sold 20.0593 trillion won during the same period. As of Wednesday, customer deposits and credit loans stood at 124.632 trillion won and 37.8005 trillion won respectively, remaining at high levels.
The market analyzed that retail net buying expanded particularly after the launch last month of leveraged exchange-traded funds (ETFs) based on single stocks Samsung Electronics and SK hynix, which have led the domestic market. The interpretation is that "FOMO (fear of missing out)" demand—from those who do not hold chip shares, or who hold them but seek higher returns—flowed into leveraged ETFs. As of Thursday, the market capitalization of single-stock leveraged products stood at 14.3695 trillion won. From May 27, when the products launched, through Thursday, retail net buying reached 8.4295 trillion won. Lee Jin-woo, head of the research center at Meritz Securities, said, "Retail FOMO buying concentrated on Samsung Electronics and SK hynix, and since both are the No. 1 and No. 2 stocks by market cap, their influence on the overall market has become enormous." He added, "It is positive that retail investors have flowed further into the domestic market through single-stock leveraged ETFs, but the risk of principal loss has also grown in a falling market."
Expectations and concerns are mixed over chip shares, another top contributor. Cited as a positive factor is that the pace of the KOSPI index's rise accelerated thanks to solid earnings at chip companies driven by the AI boom and expectations for a semiconductor boom. In fact, the top three net-buying stocks among foreign investors, who bought 1.3141 trillion won worth on the main board alone Thursday, were all chip shares and semiconductor materials, parts, and equipment stocks. Foreign investors bought 874.7 billion won and 423.5 billion won worth of Samsung Electronics and Samsung Electro-Mechanics, respectively. SK hynix also saw net buying of 84 billion won amid expectations for short-term supply-demand momentum from its American Depositary Receipt (ADR) listing.
Whether Korea is included in the Morgan Stanley Capital International (MSCI) developed market index is another key variable that could boost the Korean market's upward momentum. Inclusion in the MSCI developed market index is expected to play a positive role over the medium to long term, not only by raising the valuation of the domestic market but also by stabilizing the exchange rate through inflows of foreign investment.
On the other hand, the chip-centered "polarized market" could act as a burden that increases market volatility from a long-term perspective. Lee Young-gon, head of the research center at Toss Securities, noted, "As earnings growth proceeds centered on semiconductors, the chip-driven market mood is unlikely to change for the time being, which means that if chip shares undergo a correction, the market could be shaken and volatility could grow accordingly."
Overheating concerns also persist. The KOSPI200 Volatility Index (VKOSPI), known as Korea's fear gauge, rose 0.75% to 80.25, an all-time high.
The market projected that the domestic stock market's "chip supremacy thesis" is unlikely to change for the time being, and that on this basis the index could surpass 10,000 as early as the first half of the year. However, rather than leaning solely on the chip rally, an even rise across sectors is needed. Ko Tae-bong, head of the research center at iM Securities, said, "Korea has been discounted (undervalued) due to governance issues, but if the assessment emerges that Korea has awakened to dividends and shareholder returns, Korea will be re-evaluated." He added, "If the earnings visibility of Korean companies next year is greater than expected and Korean companies are making good money, even applying just the 30-year average multiple, the KOSPI could come out above 12,000."
Eugene Investment & Securities forecast the KOSPI could rise to a maximum of 10,400, and KB Securities to 10,500. JPMorgan and Morgan Stanley also analyzed that reaching 10,000 would be possible in bull-market scenarios.
