Kospi hits 5,000, but not yet time for a victory lap
![People celebrate as the Kospi surpasses the 5,000 mark for the first time at a Hana Bank in Jung District, central Seoul, on Jan. 22. [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2026/01/23/4017b9fc-9ceb-48f3-a9d9-682c7d3001df.jpg)
People celebrate as the Kospi surpasses the 5,000 mark for the first time at a Hana Bank in Jung District, central Seoul, on Jan. 22. [YONHAP]
On Thursday, the Kospi briefly broke through the 5,000 mark during intraday trading, just 87 days after first crossing 4,000. The milestone is meaningful, as it signals that Korea’s capital market may be emerging from a long period of deep undervaluation and entering a higher tier. But news released the same day that the economy contracted in the fourth quarter of last year serves as a reminder that it is still too early to celebrate. Unless Korea bridges the widening gap between capital markets and the real economy and between exports and domestic demand, remaining above 5,000 will be difficult.
The recent pace of the rally has been striking. The benchmark index has risen 17.5 percent so far this year, outperforming major global markets. The surge owes much to leading Korean companies riding the global AI boom. Samsung Electronics and SK hynix climbed on soaring profit expectations, followed by Hyundai Motor, which has drawn attention with its push into so-called physical AI. Optimism, abundant liquidity and policy momentum combined to fuel the rapid ascent.
Even so, warning lights have been flashing. The Bank of Korea announced that real GDP shrank 0.3 percent in the fourth quarter of 2025, defying earlier expectations of modest growth. The downturn reflected worsening construction and facility investment, key pillars of domestic demand, and the fading impact of consumption coupons that boosted third-quarter growth. As a result, full-year growth barely reached 1 percent.
The semiconductor-driven “optical illusion” behind recent figures is also evident. Semiconductor exports contributed 0.9 percentage points to last year's growth, effectively propping up the entire economy. Fourth-quarter exports fell 2.1 percent as automobiles and machinery were hit by tariff pressures, and without semiconductors, the damage would have been far greater. The same concentration risk applies to equities. Shares are rising fast now, but if concerns over an AI bubble materialize, sentiment could cool abruptly. Korea's market still has ground to cover. Listed companies trade at about 1.6 times book value, well below the S&P 500's 4.7 times and Japan's Nikkei's 2.3 times.
Some in the ruling party want to accelerate a third revision of the Commercial Act, including mandatory cancellation of treasury shares. But stock prices ultimately follow earnings. A durable rise in the Kospi requires stable economic growth and steadily rising corporate profits. Rather than quick legislative fixes, priority should be given to breaking out of low growth and strengthening fundamentals so new innovators can emerge.
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.
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