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Kospi's record bull run belies excessive concentration in certain sectors

Published: 19 Jan. 2026, 19:17 Updated: 19 Jan. 2026, 19:19

A screen in Hana Bank's trading room in central Seoul shows the Kospi ending at 4,904.66 points on Jan. 19, up 63.92 points, or 1.32 percent, from the previous session. [YONHAP]

Despite the benchmark Kospi’s surge past the 4,900 mark, analysts say the rally is increasingly concentrated on a narrow set of stocks, raising questions about the bull run's staying power amid heightened global uncertainty.

The index finished at an all-time high of 4,904.66, up 16.38 percent from the start of the year. One more advance would match the longest rallies in Kospi history, with 13-session streaks recorded in February 1984 and again in September 2019.

The heavy concentration of gains in market bellwethers like Samsung Electronics and SK hynix, however, underscores the structural fragility of the main bourse.

Chip giants dominate rally

Samsung Electronics and SK hynix accounted for 64.3 percent of the increase in the Kospi’s total market capitalization over the past month, according to Heungkuk Securities. The Kospi’s market value surpassed 4 quadrillion won ($2.7 trillion won) last Friday, a symbolic threshold. Even measured from the start of the year, the two chipmakers were responsible for 49.2 percent of the index’s gains.

The concentration has become so pronounced that many investors now say the market is effectively tracking semiconductor prices. Other export-oriented sectors such as shipbuilding, defense and robotics have shown strength, but they have not altered the overall imbalance.

That dependence has also left the market more exposed to policy risk abroad. On Friday, U.S. Commerce Secretary Howard Lutnick publicly warned companies that if they want to make memory chips, they will have to either " pay a 100 percent tariff" or "build in America."

Lee Young-won, an analyst at Heungkuk Securities, said tariff negotiations involving Taiwan and the United States suggest Washington will increasingly tie trade policy to local investment commitments.

"It is difficult to predict how much of a burden this will place on the market,” Lee said, adding that “over the long term, it is likely to complicate the shape of the semiconductor cycle.”

'K-shaped' market

A screen at Woori Bank's trading room in central Seoul shows the Kospi and Kosdaq indexes and the dollar-won exchange rate on Jan. 19. [NEWS1]

The rally has done little to lift domestically focused stocks or smaller companies, reinforcing what policymakers have described as a “K-shaped” split in the market. The recent weakness of the won has widened that divide, benefiting exporters while squeezing firms tied to domestic demand.

Rhee Chang-yong, governor of the Bank of Korea, said on Saturday that “stock prices are also splitting into a ‘K shape,’” noting that “when the [dollar-won] exchange rate rises like this, export industries benefit, but domestic companies suffer even more.”

So far this month through Monday, the KRX Consumer Staples Index, which includes food, cosmetics and retail companies, has risen just 1.34 percent. The KRX MidCap and SmallCap Total Market Indexes have each gained about 3 percent. The tech-heavy Kosdaq, home to many growth-oriented smaller firms, is up 4.63 percent, roughly a quarter of the Kospi’s gain over the same period.

The contrast with market movement in the United States has drawn notice among strategists. The Russell 2000 Index, which tracks smaller U.S. companies, has outperformed the S&P 500 for 11 consecutive sessions, reflecting a rotation toward smaller stocks during a broad market upswing. In Korea, by comparison, gains remain confined to a limited group of large-cap exporters.

A representative at a domestic brokerage said Korea’s corporate structure has amplified the problem.

"Large conglomerates often spin off promising new businesses into separately listed affiliates," the source said, adding that this makes it harder for parent companies to fully capture the value of emerging industries such as robotics.

Kim Dae-jun, a researcher at Korea Investment & Securities, said “the concentration in which only a handful of large stocks are rising is unlikely to change easily,” adding that “the market needs new growth industries.”

Investors look abroad as confidence wanes

Exchange rates for the won against the U.S. dollar, Chinese yuan and Hong Kong dollar are displayed on a screen at a currency exchange in Myeongdong, central Seoul, on Jan. 13. [NEWS1]

Despite record levels in the benchmark index, retail investors have continued to scale back exposure to Korean stocks and shift money to U.S. markets.

Data from the Korea Securities Depository show that individuals bought a net $3.25 billion worth of U.S. stocks this month through Friday. Over the same period, they sold a net 4.26 trillion won worth of Kospi shares.

The trend has added pressure on the won, as overseas equity purchases require dollar conversions. In response, the government has announced plans to introduce a “return-to-domestic-market account,” offering tax incentives to investors who sell U.S. stocks and hold Korean shares for a designated period.

Officials are also seeking longer-term inflows by pushing for Korea’s inclusion in major global benchmarks, including the FTSE World Government Bond Index (WGBI) and developed-market status under MSCI.

Finance Minister Koo Yun-cheol said earlier this month that the government would “ensure smooth inclusion in the WGBI scheduled for April and actively push for entry into the MSCI developed markets index."

Structural reforms, some economists argue, may matter more than index milestones.

Seok Byoung-hoon, a professor of economics at Ewha Womans University, said the tax system promotes short-term trading by taxing dividend income at 15.4 percent, a rate higher than the capital gains tax applied only to large shareholders.

“The balance between the two tax regimes needs to be adjusted," Seok said, adding that policymakers should consider “practical measures to encourage long-term investment, such as reducing dividend taxes for long-term holders.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY PARK YU-MI [[email protected]]