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Kospi closes above 3,000 for first time in 3 and a half years. But can the rally last?

Published: 20 Jun. 2025, 19:34

A screen in Hana Bank's trading room in central Seoul on June 20. [YONHAP]

The Kospi closed above 3,000 on Friday for the first time in three and a half years, buoyed by optimism over the new administration’s market-friendly policies, increased foreign investment and a stable exchange rate.

The benchmark index rose 1.48 percent, or 44.1 points, to end at 3,021.84. It briefly reached 3,022.06 during the session. This is the first time the index has finished above 3,000 since Dec. 28, 2021, when it closed at 3,020.24. The total market capitalization of the Kospi hit a record 2.472 quadrillion won ($1.81 trillion).

For June, the Kospi has surged 12 percent — the highest gain among key equity indexes of the Group of 20 nations.

Retail investors sold 590 billion won worth of shares to lock in profits, while foreign and institutional investors purchased a net 550 billion won and 37 billion won, respectively. Shares of SK hynix rose 4.47 percent, and most large-cap stocks posted gains. The Kosdaq also climbed 1.15 percent to close at 791.53, just shy of the 800 mark.

Crossing the 3,000 threshold is seen as a psychological milestone for investors. The index first surpassed the level on Jan. 7, 2021, and later hit an all-time high of 3,305 on July 6 that year. Since then, it had remained trapped between 2,200 and 2,800 for over three years.

Analysts attribute the renewed momentum to policy expectations under the Lee Jae Myung administration. Market reforms under consideration — including revisions to the Commercial Act to broaden fiduciary duties to shareholders, increased dividends and share buybacks — have improved investor sentiment.

“The government’s push to resolve the so-called Korea Discount, along with expectations of a supplementary budget and interest rate cuts, are driving the market higher,” said Lee Kyung-min, an analyst at Daishin Securities. The Korea Discount refers to the tendency of Korean stocks to trade at lower valuations compared to global peers.

A stronger won also supported the rally. The local currency finished at 1,365.6 won per dollar, up 14.6 won from the previous day. The won had traded above 1,400 per dollar just two months ago. A stable exchange rate has encouraged foreign buying, as investors seek gains from currency movements. According to the Korea Exchange, foreign investors have purchased 5.37 trillion won worth of Kospi stocks this month.

President Lee Jae Myung listens to a briefing during his visit to the Market Oversight Commission at the Korea Exchange in Yeongdeungpo District, western Seoul, on June 11. [NEWS1]

Concerns remain about potential U.S. tariff hikes, but analysts believe the worst may be over.

Defense and shipbuilding stocks led the recent gains, benefiting from expectations surrounding the second Trump administration and ongoing geopolitical tensions involving Israel and Iran. Shares of Hanwha Aerospace and HD Korea Shipbuilding & Offshore Engineering have jumped 10 percent and 19.3 percent, respectively, this month.

Meanwhile, Samsung Electronics — the Kospi’s largest constituent — has underperformed. The stock gained 0.51 percent on the day to close at 59,500 won, up 5.7 percent this month, well below the Kospi’s overall gain of 12 percent. In contrast, rival SK hynix surged 25.7 percent during the same period.

“If Samsung Electronics begins mass-producing high bandwidth memory (HBM), a key component for AI chips, its share price will rebound and lift the Kospi further,” said Lee Chai-won, chair of Life Asset Management.

With the Kospi now above 3,000, investors are eyeing the next targets — 3,100 and 3,200. But some caution that the rally may stall.

“Given the sharp rise in a short time, retail investors may soon seek to cash in profits,” said Noh Geun-chang, head of research at Hyundai Motor Securities. “For the index to enter a sustained upward trend, we need to see fundamental improvements in corporate earnings, as well as effective capital market reforms and continued foreign inflows.”

Lee Kyung-min added, “We may see a pause in the third quarter due to the steep rise, but the Kospi could still reach 3,200 by the end of the year if the U.S. cuts rates in September and Trump’s policy stance shifts toward economic stimulus.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY HWANG EUI-YOUNG [[email protected]]