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Kospi rises nearly 30% in May, but all sectors save for one lag behind gains

Published: 30 May. 2026, 17:56 Updated: 30 May. 2026, 18:01

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at a record high of 8,476.15 points on May 29, up 290.86 points, or 3.55 percent, from the previous trading session. [NEWS1]

Although the benchmark Kospi surged more than 28 percent in May, most stocks actually declined during the month, signaling growing market polarization as buying activity concentrated in a small number of large-cap stocks driven by the artificial intelligence semiconductor rally.

The Kospi closed at a record high of 8,476.15 on Friday, up 3.55 percent from Thursday, according to the Korea Exchange. The index has jumped 28.45 percent so far in May.

However, only one sector, electrical and electronics, outperformed the Kospi's return. Twenty-one other sectors, including insurance, retail and IT services, lagged behind the broader market's gains.

The broader rise in the Kospi was effectively driven by a small number of semiconductor stocks and power-related shares that also benefited from the AI rally.

The concentration was also evident at the individual stock level. Among the 948 Kospi-listed stocks, only 111, or about 12 percent, posted gains in May. By contrast, 811 stocks, or 86 percent, declined, while 26 remained nearly unchanged.

"Large-cap semiconductor stocks are drawing investor attention, reinforcing market concentration," said Lee Kyung-min, a researcher at Daishin Securities. "Outside the semiconductor sector, only selected individual stocks are rising, and differentiation among stocks is becoming more pronounced."

While the market rally has been supported by earnings growth, concerns are also growing that stock prices have risen too sharply relative to earnings.

The SK hynix logo and a computer motherboard appear in this illustration taken Aug. 25, 2025. [REUTERS/YONHAP]

According to data compiled by Kiwoom Securities as of Thursday, of the Kospi's 24 percent gain this month, earnings contributed 8.5 percentage points while price-to-earnings ratio (PER) expansion accounted for 15.5 percentage points.

PER is an indicator of how highly investors value future growth potential and typically rises when expectations exceed current earnings performance. On a monthly basis, this marked the first time this year that PER contribution exceeded earnings contribution.

Stock prices are generally determined by multiplying earnings per share (EPS) by PER. A larger PER contribution than EPS contribution to the Kospi's rise suggests that the market's gains have depended more on optimism about future performance than on actual earnings improvement.

The concern is that such gains can reverse quickly.

"The fact that May's market rally was driven more by expectations than earnings growth is another factor that could increase volatility," said Han Ji-young, a researcher at Kiwoom Securities. "In the short term, the market may become more sensitive to macroeconomic variables such as interest rates, profit-taking activity and a reversal of concentrated buying."

In particular, with relatively few stocks participating in the rally, profit-taking pressure could become concentrated in leading shares. Price movements in a handful of large-cap stocks could weigh on the broader index and amplify market volatility.

Still, expectations for additional gains remain intact.

"From a full-year perspective, the strength of earnings fundamentals remains unchanged," Han said. "Of the Kospi's 94.2 percent increase since the beginning of the year, earnings contributed 126 percentage points while expectations contributed minus 31.8 percentage points."

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG SEO-YUN [[email protected]]