The KOSPI index climbed to 5,000 points for the first time ever. It is a peak our stock index has never reached. It comes 70 years after Korea's stock market began its first transaction, with Korea Exchange established on the basis of the Securities and Exchange Act first enacted in 1956.
The KOSPI index started at 100 in Jan. 1980, broke through 1,000 points for the first time in Mar. 1989, and ushered in the "2000 era" in Jul. 2007, 18 years later. The KOSPI rose to the 3,000 level thanks to the "Donghak retail investor movement" right after the COVID-19 crisis. It took 13 years and 5 months to go from 2,000 points to 3,000 points, but it surpassed 4,000 points in Oct. last year, about 4 years and 10 months later. Then, in less than three months, it rose another 1,000 points.
On the 22nd, the KOSPI index surged more than 2% from the previous trading day and topped 5,000 points intraday. The decisive factor was that the Greenland crisis, which had weighed on global markets, entered a calming phase. As U.S. President Donald Trump dismissed the geopolitical risk by signaling a rejection of the use of force and a withdrawal of tariff threats, U.S. stocks jumped across the board, and that warmth was conveyed intact to the domestic market. With uncertainty cleared, the KOSPI reignited its march to a record high.
The record-breaking breach of 5,000 points on the KOSPI was the result of a combination of a globally abundant liquidity environment, improved earnings at listed companies led by semiconductors, and the government's strong support measures to make stocks a means of asset growth for households by resolving the chronic discount of our market.
According to Mirae Asset Securities, the consensus for combined operating profit of domestic listed companies this year is about 465 trillion won, expected to increase 65% from last year. In particular, profits in the semiconductor sector, which has entered its peak heyday amid a global wave of AI investment, are projected to surge.
Samsung Electronics and SK hynix, which concentrated expectations for earnings improvement, played the biggest role in opening a new era of 5,000 points for our market. Just a year ago, Samsung Electronics shares hovered around 50,000 won, but have topped 150,000 won, and SK hynix shares have soared nearly 250% over the past year. New "emperor stocks" with a per-share price exceeding 1 million won, such as Hanwha Aerospace, Hyosung Heavy Industries and Samyang Foods, have also emerged.
Experts say that even though the KOSPI index has jumped sharply in a short period as listed-company earnings have improved significantly, the "valuation burden" is not large. That means the pace of corporations' earnings improvement is outpacing the rise of the KOSPI. Goldman Sachs, a global investment bank, evaluated the upward trend in the Korean market in its recently released annual outlook as an "earnings-driven rally supported by value-up," and set its investment view to "overweight."
The government's aggressive market-boosting measures were also the primary driver in opening the first-ever 5,000 era. The Lee Jae-myung administration, launched last year, nailed "KOSPI 5000" as its top state agenda item and pushed hard. The ruling party even formed a "KOSPI 5000 special committee" and backed it by legislating various shareholder-friendly policies, including amendments to the Commercial Act.
Last year, the Democratic Party processed the first amendment to the Commercial Act expanding the duty of loyalty of directors to include shareholders, and mandated cumulative voting, which favors minority shareholders. The top marginal rate for separate taxation of dividend income was lowered, and an amendment to the Commercial Act requiring listed companies to retire treasury shares is also set to pass the National Assembly.
The effect was immediate. Paid-in capital increases by listed companies and issuance of equity-linked bonds dropped sharply, and a wave of treasury-share cancellations followed. By reducing the number of shares in circulation in the stock market, the per-share value rose. According to Daishin Securities Research Center, net stock supply in the Korea Exchange market recorded minus (-) 3.6 trillion won last year. That means the amount of stock supplied through paid-in capital increases and CB issuance was smaller than the scale of treasury shares retired.
Lee Kyung-yeon, an analyst at Daishin Securities, said, "In the past, the Korea Exchange market was a 'supply-dominant' market with more fundraising, but as the scale of share retirements for shareholder returns has grown beyond corporations' fundraising needs, a structural shift to a 'supply-reduction market' has begun," and added, "It is a signal that the domestic market has ended the era of 'dilution' and entered an 'era of returns.'"