Seoul: South Korea's KOSPI index reached unprecedented heights this week, closing at 6,615.03 on Monday and continuing its upward trajectory to 6,641.02 on Tuesday. This marks a significant milestone as the combined value of companies listed on the local market surpassed 6,000 trillion won ($4.08 trillion) for the first time.
According to Yonhap News Agency, the rapid growth of the KOSPI market, which has expanded approximately 2.7 times from a year earlier, is largely driven by a robust semiconductor upcycle. This surge is attributed to global demand for artificial intelligence infrastructure, with industry giants Samsung Electronics and SK hynix reporting substantial first-quarter operating profits of 57 trillion won and 37 trillion won, respectively. Together, these two companies account for over 40 percent of the KOSPI's value, illustrating a significant concentration within the market.
While the semiconductor boom has bolstered other sectors such as power equipment and shipbuilding, the KOSPI's heavy reliance on a single global cycle poses inherent risks. Any decline in AI investment or shifts in technology spending could potentially affect Korean equities. Domestically, a planned strike by Samsung Electronics' labor union in May could disrupt production and have economic repercussions.
Geopolitical tensions, particularly in the Middle East, add another layer of risk. Uncertainty surrounding energy routes like the Strait of Hormuz could affect supply chains and lead to volatile commodity prices. Despite these uncertainties, investor behavior indicates a growing appetite for risk, with credit-financed stock purchases and margin balances nearly doubling compared to the previous year.
The market's performance contrasts sharply with Korea's real economy, which is experiencing a downturn in potential growth rates. The first quarter's growth of 1.7 percent was heavily reliant on semiconductor exports, while indicators such as rising court auction filings and delinquency rates reveal underlying economic stress.
Experts suggest that to ensure long-term stability, financial regulators should closely monitor leverage within the market and address underperforming firms. Additionally, diversifying the industrial base into sectors like defense, biotechnology, and robotics could mitigate the risks associated with the current concentration on semiconductors. While the recent milestone reflects strength in the semiconductor sector, the broader economy's foundation remains a critical area of focus for sustained growth.