Compared with the U.S. stock market, Korea's market, which had relatively lagged every year, rebounded sharply this year. The price-to-book ratio (PBR; market capitalization ÷ net worth) topped 1. That means market capitalization, which had long been valued below 1, exceeded listed companies' book value.
Individual investors who invest in the domestic stock market also posted higher returns than those investing in overseas stocks such as the United States, delivering strong results.
This year, the KOSPI index rose 75.6% (2,399.49→4,214.17) from the end of last year, ranking No. 1 among the Group of 20 (G20) and the Organization for Economic Cooperation and Development (OECD) members. The KOSPI index topped 4,200 for the first time ever, and market capitalization broke through 3,000 trillion won.
The KOSPI rebounded sharply compared with 2,236 points in 2022 (–24.9%), 2,655 points in 2023 (18.7%), and 2,399 points in 2024 (–9.6%). The KOSDAQ index also rose 36.5% this year. The Korea Exchange (KRX) cited as reasons for the domestic market's gains: ▲ expectations for capital market revitalization policies such as eradicating unfair trading ▲ improvement in the semiconductor cycle ▲ efforts by listed companies to enhance corporate value.
The most encouraging change is the easing of the chronic undervaluation known as the "Korea discount." PBR topped 1 again for the first time in four years since the end of 2021 (1.1 times). Although PBR was around 0.8 times at the start of the year and the price-earnings ratio (PER; market capitalization ÷ net income) was 12.7 times, as of the 30th they had risen to 1.4 times and 17.6 times, respectively, proving that the market's weight class itself has changed. In response, global IB JP Morgan upgraded Korea to "overweight" and focused on the KOSPI's "re-rating (revaluation)."
Individual investors who invest in the domestic market also ended the year with a strong report card. According to NH Investment & Securities, from Jan. 1 to Dec. 16 this year, among its retail clients who invested in domestic stocks (transaction or holdings), the average return was 32.1%. That figure far outpaced the returns of Korean retail investors trading U.S. stocks who invested in overseas markets such as the United States (12.7%) and Japan (8.8%) over the same period, making this year, at least, a decision win for the Korean stock market.
Still, with the KOSPI remaining undervalued compared with major countries, analysts say steady qualitative growth must continue next year. That is because, despite the significant improvement in the KOSPI's PBR this year, it has only just barely surpassed 1, the level of book value.
In fact, while the KOSDAQ's PBR (2.1 times) is higher than the KOSPI's, the gap remains clear compared with valuations for the U.S. S&P 500 (5.6 times) and Nasdaq (4.7 times). The view is that for the Korean market to rise to a fully fledged advanced market, structural valuation improvement beyond numerical gains is urgent.
Lee Ung-chan, an iM Securities researcher, said, "Government system improvements will continue to support the lower bound of the index, but momentum (upside potential) may gradually slow," adding, "Ultimately, the ceiling for next year's market will be determined by how far semiconductors can go."
The researcher added, "This year's market rose steeply as it priced in strong semiconductors, and corporate value (valuation) has risen in line with expectations," saying, "Next year, the additional upside may be somewhat more limited than this year."