The KOSPI index crossed 6,000, 250 days after it surpassed the 3,000 mark. The pace of gains is rarely seen even compared with benchmark indexes of major countries. Among investors, however, there are concerns that "because the market has risen too quickly, a sharp correction may follow." Still, experts say the pullback is likely to be limited because this rally is based on improvements in corporations' earnings.
According to the Korea Exchange (KRX) on the 3rd, the KOSPI index, which was 3,021.84 on June 20, rose to nearly double in 250 days to 6,083.86 as of Feb. 25. In trading-day terms, it is only 167 days.
What led the index higher were large-cap semiconductor stocks such as Samsung Electronics and SK hynix. The combined weight of the two corporations, which was 22.4% relative to the market capitalization (2,407 trillion won) on June 20 last year, reached 38.46% relative to the market capitalization (5,016 trillion won) as of Feb. 25, when the KOSPI broke through 6,000. In the course of the index's rise, the tilt toward large-cap semiconductor stocks strengthened significantly.
This pace is exceptionally fast even among major countries' stock market advances. For the U.S. benchmark index Standard & Poor's (S&P) 500, the fastest historical doubling was from the low of 2,237.40 on March 23, 2020, to the high of 4,479.70 on Aug. 16, 2021, taking about 1 year and 5 months, or 354 trading days.
The KOSPI's speed outpaced even the rise of the Nasdaq, which is composed of technology corporations with higher growth potential than the S&P. The fastest doubling in Nasdaq history was from 7,201.8 on March 12, 2020, to 14,500.51 on June 28, 2021, taking 327 trading days.
Among advanced countries such as Europe, Japan, and Taiwan, the growth speed of Korea's stock market is unprecedented. The Euro Stoxx 50 doubled in a little over a year from 1998 to 1999 at its fastest pace, and Japan's Nikkei 225, which surged during the 2012 Abenomics phase, also took more than 700 days to double from the low. Taiwan and Germany typically took 2 to 3 years to double.
Among emerging markets, China offers a surge case. The CSI 300, one of China's benchmark indexes, took about 140 days to climb from the 1,700 level in Nov. 2006 to the 3,400 level in Apr. 2007. It is analyzed that in a period of abundant global liquidity, expectations for China's high economic growth combined to drive a rapid inflow of investment funds.
Some express concern on the grounds that major stock indexes have faced sharp declines after surges. The S&P 500, after peaking in Aug. 2021, saw about a 25% correction over 2022, and the KOSPI also once fell more than 30% from its 2021 peak. In particular, given that the KOSPI's recent rise has been extremely fast compared with major-country indexes, some worry that a bigger downturn than before could be coming.
Still, experts say the focus should be on fundamentals rather than the speed itself. Jeong Hae-chang, a researcher at Daishin Securities, said, "When fundamentals are weak and the market surges only on flows or expectations, a faster rise leads to a larger correction," but added, "This rally is different from the past in that improvements in corporations' earnings are accompanying increased investment in artificial intelligence (AI)."
Kim Yong-gu, a researcher at Yuanta Securities Korea, said, "The KOSPI force-balance indicator is at 0.3 point (Pt), above the overbought threshold of 0.25 Pt, showing signs of short-term overheating," and noted, "If external variables materialize—such as the rekindling of Trump tariff risks, U.S.-Iran clashes, and greater interest-rate volatility—a correction will be unavoidable."
However, Kim analyzed, "Judging by the maximum drawdowns from the peaks over the past four years, corrections stemming from global cyclical noise were limited to around minus 10%," and added, "Given that trend-buffering factors such as global economic and earnings momentum and the AI cycle are stronger now, even in the worst case it is highly likely to be a time correction of around minus 5%."