Seoul: South Korea's benchmark Kospi index has surpassed the significant 6,000 milestone for the first time, closing at 6,307.27 on Thursday, reflecting a 3.67 percent increase.
According to Yonhap News Agency, this swift rise highlights a fundamental shift in Korea's capital markets and a growing global demand for its industrial capabilities, particularly in the semiconductor sector.
The rapid climb from 5,000 to 6,000 within a month marks a departure from the long-standing "Korea discount" narrative, suggesting a structural breakout supported by both domestic policy reforms and international market dynamics. The semiconductor industry, buoyed by global shifts from AI training to inference, has played a pivotal role, with companies like Samsung Electronics and SK hynix reaching new heights due to strong earnings from industry leaders like Nvidia.
Policy adjustments under the Lee Jae Myung administration have also contributed to this market shift. Reforms aimed at enhancing shareholder rights and reducing treasury stock accumulation have encouraged a reevaluation of Korean equities. Concurrently, household investment patterns are evolving, with funds moving from real estate into stocks and exchange-traded funds, indicating a significant change in wealth allocation.
However, the surge in market activity raises concerns about the leverage fueling this growth. Credit trading has reached a record 31 trillion won ($21.7 billion), and brokerage credit loans are rising, suggesting a risk of rapid margin calls and increased volatility. The Bank of Korea's decision to maintain its policy rate at 2.5 percent reflects broader economic constraints, including a fragile won, rising housing prices, and expanding household debt.
Despite equities rising approximately 40 percent this year, economic growth remains modest, with last year's rate barely exceeding 1 percent. The concentration of gains in major companies like Samsung and SK hynix raises questions about the sustainability of this growth, with the index potentially falling closer to 4,000 without their contributions.
Brokerages are optimistic, with some projecting the index to reach 7,000 or 8,000, albeit lightly discounting potential external shocks and domestic fiscal pressures. For the 6,000 level to become a stable floor, capital must diversify into emerging industries and domestic consumption needs to catch up with asset prices.
Regulators are urged to prioritize reinforcing market safeguards rather than merely celebrating milestones. Ensuring brokerage liquidity and addressing the overdue debate on fair taxation of financial investment income are crucial steps toward stabilizing this newfound market era. The choices made during this optimistic phase will determine whether this milestone marks a robust new beginning or a precarious high point.