Korea Breaks New Stock Market Records - But Is the 'Korea Discount' Over?

Record Run

Korea's benchmark KOSPI has climbed to fresh records this year, with gains approaching the high-40 percent range from January. The rally has been led by semiconductors and large-cap exporters that benefit from the AI hardware cycle and a still-supportive external backdrop. Turnover has widened beyond a handful of names, and the run has revived a long-running question in Seoul's markets: is the "Korea discount" finally fading or simply masked by a powerful chip upturn?

Drivers Behind the Momentum

Foreign investors returned in size as earnings forecasts for memory and foundry players improved and currency moves made valuations look attractive on a hedged basis. Domestic flows also mattered; pension and retail money moved through index vehicles that concentrate weight in megacaps, reinforcing each new breakout. Policy efforts-ranging from guidance on dividends and buybacks to pushes for cleaner disclosures-added to the perception that shareholder returns are becoming more predictable at the country's flagship firms.

The Discount Debate

Optimists say that higher returns on equity, formal capital-return frameworks and gradual simplification of holding-company structures argue for a durable rerating. They point to steadier free-cash-flow generation at leading techs and a shift in board composition at some conglomerates. Skeptics counter that governance gaps remain uneven across groups, cross-holdings still obscure true economics at several listings, and profit concentration in a narrow slice of the market leaves valuations exposed if the chip cycle cools or the won strengthens. For them, a real end to the discount would require broader earnings breadth and repeatable cash-return policies beyond a single cycle.

Risks and Confirmation Signals

The next phase turns on whether autos, banks, chemicals and services can contribute to earnings growth rather than riding multiple expansion alone. Currency swings will influence foreign participation, while global signals-US rates, China's demand pulse and the cadence of AI capex-will determine whether today's assumptions hold. The strongest confirmation of a lasting re-rating would be a second straight year of market-wide EPS growth, sustained double-digit payout policies at major groups, and visible progress on minority-shareholder protections that narrow conglomerate discounts.