What it takes for the Kospi to hit 5,000

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What it takes for the Kospi to hit 5,000

Published: 15 Jul. 2025, 00:04

Audio report: written by reporters, read by AI

Cho Min-geun

The author is the business and industry news editor at the JoongAng Ilbo.

During the last administration, Korea instituted what was informally known as the Finance 4 meeting. The regular gathering included the Deputy Prime Minister for the Economy, the governor of the Bank of Korea, the chair of the Financial Services Commission and the head of the Financial Supervisory Service. Together, these figures served as a de facto economic command center.

Even after the December martial law scare, this group continued to convene. Its form echoed earlier advisory forums — President Park Chung Hee’s “Green Room” meetings or the Blue House’s “West Annex meetings” — but without direct presidential involvement. That built space for more candid debates among Korea’s top economic policymakers.

Dealers work at the Hana Bank headquarters dealing room in Jung District, central Seoul, on the morning of July 11. [YONHAP]

One key issue discussed was revising the Commercial Act. The proposal would broaden fiduciary duty for directors from serving the company to serving shareholders, responding to small investors’ calls. The ruling party, then in opposition, championed the change. Business leaders pushed back, warning of lawsuits and a threat to management control.

Inside the Finance 4 discussions, the mood was evenly split. A senior official noted that even those opposed agreed that small investors needed protection. They preferred updating the Capital Markets Act rather than rewriting the Commercial Act. Spreading regulatory tools across multiple laws could target issues like split listings, unfair rights offerings and token dividend payouts without destabilizing governance structure.

The proposed revisions initially stalled under an acting president’s veto. But after the new administration took office, the legislation passed with support from even the conservative bloc. That shift surprised many in business circles, who had misjudged evolving public sentiment.

Since the Commercial Act was amended, the stock market has rallied. The Kospi has risen about 18 percent since President Lee Jae Myung’s inauguration. Optimism is growing that a "Kospi 5000" era could be within reach — sparking excitement across the ruling party.

With headwinds from the global tariff dispute, soft domestic demand and surging Seoul home prices, the stock surge stands out. Democratic Party lawmakers have already proposed “more robust” revisions to the law. Proposals include introducing cumulative voting, allowing separate audit committee elections and mandating share buyback cancellations.

Driven by the rally, some aim to credit this surge at next year’s local elections. They hope to claim “we revived the economy” by delivering a booming stock market.

Yet high expectations can backfire. Korea’s stock market does need stronger shareholder protections. But it also lacks adequate safeguards for governance and tax regimes that discourage returning value to investors. If the revisions shake things up before protections are in place, companies may retreat into defensive postures.

Instead of innovating, they might focus on defending their control. Speculative, short‑term investors could reap gains while long‑term shareholders are sidelined. And with no supporting framework being discussed amid the legislative sprint, concern is quietly spreading.

More fundamental issues are equally important. Stock prices reflect policy and liquidity but ultimately are a function of corporate profits. And with growth prospects, share prices can exceed earnings expectations several times over.

Yet in today’s rally, true growth narratives are lacking. Korea’s potential GDP growth is well under 1 percent. Many key industries show little growth. In such an environment, investors shouldn’t be lulled by relief from steep undervaluation alone.

Rising stock prices should coincide with money shifting from real estate into sectors generating innovation and productivity. In contrast, today’s rally is largely driven by financial stocks, which are naturally sensitive to legal changes.

A senior executive at a major financial group said the stock rise felt too sharp. “We are just correcting undervaluation,” he said, “But that by itself won’t sustain a rally. Capital must flow into industries leading growth and innovation.”

Can the Kospi reach 5,000? If it does, the combined market value of listed Korean firms would reach around 4 quadrillion won ($2.9 trillion) — more than a 50 percent increase. That sounds ambitious but isn’t outlandish in global terms.

The National Assembly passes a partial amendment to the Commercial Act during a plenary session on July 3. [YONHAP]

Take Nvidia, a leading U.S. AI firm. Its market cap alone exceeds 5.5 quadrillion won. That shows the potential scale of growth when markets back world‑class innovation.

To sustain a Kospi 5000 era, Korea needs a clear blueprint. Legal reform must balance shareholder rights with corporate governance and growth incentives.

Real economy challenges remain. Real estate continues to absorb investment capital and overheat consumer spending. Without a shift toward equity markets and productive industries, the stock market rally remains fragile.

The new government must sketch its path across real estate, capital markets and innovation ecosystems. If it succeeds — redirecting capital toward long‑term growth — then the Kospi 5000 goal could become more than a headline ambition. Until then, today’s gains risk fading as quickly as they appeared.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.