Samsung surge, policy optimism power Kospi’s record run toward 5,000

South Korea's benchmark topped the historic 4,000 point mark on Monday, extending a rally fueled by investor optimism over policy support aimed at boosting the equity market and narrowing the long-standing “Korea discount.”

With this milestone, the market is now setting its sights on the next target: 5,000.

The Kospi breached the 4,000 level for the first time, closing the session at an all-time high of 4,042.83. It gained 101.24 points, or 2.57 percent, from the previous session.

After opening at 3,999.79, the index quickly surpassed 4,000 and continued to gain throughout the session, ending at its intraday high.

Amid the upbeat sentiment, tech heavyweight Samsung Electronics also reached a milestone, surpassing 100,000 won ($70) for the first time. The stock closed at its day high of 102,000 won as well.

Net buying by foreign and institutional investors pushed the index higher, with each pouring in 647 billion won and 234 billion won, respectively. Retail investors, meanwhile, offloaded shares worth 797 billion won.

The Kospi’s surge to 4,000 comes just four months after it first crossed the 3,000 point threshold on June 20, following the inauguration of the new administration earlier that month. Since then, the index has been on an unprecedented rally, surpassing 3,100 on June 24 and 3,200 on July 14.

While gains briefly stalled in August amid uncertainty over prolonged trade talks, the rally regained momentum in September, hitting 3,300 on Sept. 10 and 3,400 on Sept. 15. In October, the Kospi accelerated further, successively surpassing 3,500 on Oct. 2, 3,600 on Oct. 10, 3,700 on Oct. 17, 3,800 on Oct. 21, and finally breaking through the 3,900 mark on Thursday before reaching the 4,000 milestone Monday.

Local analysts expect the rally to continue for now, noting that the index remains relatively undervalued compared with global peers. Its forward price-to-earnings ratio (P/E) remains modest relative to projected earnings growth, suggesting room for further upside.

“The index’s 12-month forward P/E stands at 11.6 times, exceeding the 20-year historical average of 10 times. However, compared with the 2021 bull market or 2023 levels, it remains relatively low. Despite recent sharp gains, overvaluation pressure is not considered significant,” said Kim Jae-seung, strategist at Hyundai Motor Securities.

Even Wall Street investment banks are optimistic about Korea’s stock rally. Earlier this month, Morgan Stanley projected that the Kospi could rise to as high as 4,200 by June, while JP Morgan forecast the index could reach up to 5,000 within the next 12 months in a bull-case scenario.

JP Morgan further noted that “a full removal of governance-related discounts and additional upside from balance sheet and stale equity cleanup” could propel the index beyond the 5,000 level.

Policy support remains a key driver. For example, the revision of the Commercial Act in July, which requires directors to act in the interest of all shareholders, is widely seen as a direct catalyst for the rally.

Sue Lee, APAC head of Index Investment Strategy at S&P DJI, said the Kospi’s upswing reflects more than just a rebound from earlier downturns. She pointed to improved dividend policies as another factor that could sustain momentum.

“Global investors tend to place greater emphasis on dividend returns rather than capital gains,” Lee said, adding that Korean companies’ traditionally low dividend focus has contributed to the Korea discount.

“Dividends are more than regular payouts. A company’s ability to consistently — or even gradually — increase dividends signals financial strength and gives investors confidence to stay invested.”

Lee Hyo-seob, senior research fellow at the Korea Capital Market Institute, also highlighted the importance of stronger corporate earnings, saying, “The Kospi could hit 5,000 as early as the first half of next year.”

“Ultimately, corporate earnings need to improve. The rally is currently being driven by blue-chip stocks, but Samsung Electronics alone cannot sustain it. The performance of small- and mid-cap shares will be crucial to keeping the momentum going.”