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KOSPI rally masks widening market polarization, economic divide
The benchmark KOSPI index is displayed on an electronic board at the dealing room of Hana Bank headquarters in Seoul, Thursday. The index closed at another record high of 7,490.05, up 105.49 points, or 1.43 percent, from the previous session. Yonhap
By Jun Ji-hye
Semiconductor giants dominate gains as broad market participation remains weak
Even as the KOSPI fuels one of the strongest bull runs in the market’s history, experts warned Thursday that the surge in the benchmark index should not be interpreted as a sign that economic conditions are improving evenly across society.
They noted that with gains concentrated in a small group of heavyweight exporters, particularly semiconductor stocks, a considerable number of retail investors are finding it increasingly difficult to benefit from the rally, reinforcing market polarization in what is being described as a “K-shaped” trend.
At the same time, elevated oil prices and broader cost-of-living pressures continue to dampen consumer sentiment, leaving small merchants and self-employed workers under financial strain.
On Wednesday, the KOSPI jumped 6.45 percent from the previous trading day to close at 7,384.56, surpassing the 7,000 threshold for the first time since the index was introduced in 1983. On Thursday, it opened another 114.51 points, or 1.55 percent, higher at 7,499.07 and briefly climbed above the 7,500 mark for the first time intraday before ending the session at 7,490.05, up 105.49 points, or 1.43 percent.
As the index extends its historic rally, gains have become increasingly concentrated in semiconductor heavyweights Samsung Electronics and SK hynix, highlighting growing imbalances within the market.
The KOSPI’s market capitalization climbed to an all-time high of 6,070.7 trillion won ($4.2 trillion) on Wednesday, breaking through the 6,000 trillion-won mark only about two months after surpassing 5,000 trillion won on Feb. 25.
Of the 1,000 trillion won added to the market’s total value during that period, around 390 trillion won came from Samsung Electronics and about 410 trillion won from SK hynix, meaning the two chipmakers accounted for nearly 80 percent of the overall increase.
Data from the Korea Exchange showed that despite the index’s sharp rally on Wednesday, only 200 of the KOSPI’s 948 listed companies, or 21.1 percent, recorded gains, while 679 stocks, representing 71.6 percent of the market, moved lower.
The figures highlight a growing disconnect between the KOSPI’s headline performance and investors’ actual market sentiment, suggesting that the rally is not being driven by broad-based market participation.
Foreign investors’ buying momentum has also been centered almost entirely on semiconductor shares. Over the two trading days beginning Monday, overseas investors recorded net purchases of more than 6 trillion won, with over 2 trillion won directed into SK hynix alone.
“The concentration of foreign inflows into large-cap tech and electronics names has made market imbalances even more visible,” said Lee Kyung-min, an analyst at Daishin Securities.
Beyond semiconductors, much of the broader market remains in a downturn, with biotech, robotics and consumer goods shares showing notable weakness. The tech-oriented Kosdaq index has also failed to build meaningful upward momentum even as the KOSPI posts record gains.
Kim Jae-seung, an analyst at Hyundai Motor Securities, said, “Excluding semiconductors, upgrades to earnings forecasts remain limited. Right now, improvements in market fundamentals are largely concentrated in the semiconductor industry.”
In addition, rising oil prices, viewed as one of the key indicators of real economic conditions, are continuing to burden households and smaller businesses despite the stock market rally.
Higher fuel costs are pushing up transportation expenses, fueling broader inflationary pressure by raising the prices of food and consumer goods. Small merchants, which are more heavily dependent on logistics, are facing growing pressure on margins.
Experts underscored that widening disparities between large corporations and smaller firms, as well as between wealthier households and financially vulnerable groups, are increasing credit risks across the Korean economy.
Jung Yong-taek, an analyst at IBK Securities, said profits generated by major semiconductor companies have not been spreading meaningfully throughout the broader economy, limiting any expansive economic spillover effect.
He added that loan demand among small and medium-sized enterprises, self-employed workers and financially vulnerable households is rising, but tighter lending standards are making access to funding more difficult.
“The trickle-down effect from large corporate earnings has been limited in Korea, meaning that when profit concentration intensifies among major firms, smaller companies often fail to see earnings improve or may even experience worsening conditions,” Jung said.
“Periods marked by low credit risk and easy access to financing generally support economic expansion, but tightening credit conditions tend to dampen business activity. If credit risks materialize, they could weaken the labor market and push the economy from its peak toward a slowdown.”
The Kosdaq, meanwhile, opened 0.66 points, or 0.05 percent, higher at 1,210.83, but closed 10.99 points, or 0.91 percent, lower at 1,199.18.
In the Seoul foreign exchange market, the Korean won opened 6.5 won higher against the U.S. dollar at 1,448.6 won and ended onshore trading 1.1 won higher at 1,454 won.