Asia’s Stock Markets Deliver A Strong 2025: Korea Soars 76%, Japan Tops Bubble‑Era Peak, Indonesia Records Best Year In 11 Years

Asia’s principal equity markets produced notable gains in 2025, with South Korea, Japan and Indonesia each posting double‑digit returns. The Seoul Composite Index surged nearly 76% for the year, marking its largest annual advance since 1999. Japan’s TOPIX closed at a year‑end record, surpassing the 1989 bubble‑era high, while Indonesia’s Jakarta Composite Index rose about 22%, its strongest performance since 2014.

South Korea led regional performance, outpacing the S&P 500’s roughly 17% gain and the MSCI Asia‑Pacific Index’s approximately 25% rise. Semiconductor leaders such as Samsung Electronics and SK Hynix were among the top contributors, and sectors including defense and nuclear power also delivered substantial returns. Japan’s TOPIX finished the year at 3,408.97 points, up 22% for the year and marking a third consecutive annual increase, a sign that the market’s buyer base has broadened.

Indonesia’s advance was driven primarily by domestic retail participation, which offset about USD 1 billion of net foreign outflows. Following a sequence of interest‑rate cuts that reduced bond yields, Indonesian retail investors sought higher returns in equities. Brokerages including Citi, JPMorgan and Nomura have noted that these markets retain upside potential into the coming year.

South Korea’s Rally Was Led By AI Infrastructure And Memory Chips - The KOSPI closed the final trading day at 4,214.17, down 0.2% on the day but up 75.6% for the year — the strongest annual performance in 25 years. The rally encompassed semiconductors, defense, nuclear power and consumer sectors such as K‑beauty. Investment in AI‑related infrastructure emerged as a key driver, with transformer and nuclear‑supply companies posting outsized gains as investors anticipated sharply higher power demand from data centers. In the memory‑chip segment, Samsung Electronics rose 125% to record levels and SK Hynix advanced about 270%, while related firms also recorded triple‑digit gains amid expectations of tightening supply. Defense contractors benefited from increased defense spending, and the K‑beauty sector showed mixed outcomes as some incumbents outperformed while others lagged. Several analysts at major brokerages project further upside for the Korean market, forecasting at least another 20% gain next year supported by robust earnings growth.

Japan’s Valuation Repricing Propelled TOPIX Past 1989 Levels - TOPIX’s year‑end close at 3,408.97 points exceeded the 2,881.37 level recorded at the end of 1989, establishing a new historical year‑end high. The index’s 22% annual gain reflected a widening base of buying interest, with valuation adjustments extending gains from AI‑related names into financials and domestic demand sectors such as construction and real estate. The index experienced a sharp drawdown in early April following reciprocal tariff announcements, but it recovered as trade‑war concerns eased and Japanese equities were perceived as relatively undervalued versus U.S. and European peers. Small‑ and mid‑cap segments outperformed large caps for the first time since 2022, signaling broader market participation. Market strategists expect corporate governance reforms and improved capital allocation to further support TOPIX performance in 2026.

Indonesia’s Rally Fueled By Retail Inflows, Despite Foreign Outflows - The Jakarta Composite Index’s roughly 22% gain in 2025 represented the best annual showing since 2014. The advance was largely attributable to heightened retail investor activity, which intensified after policy easing reduced fixed‑income yields and prompted a search for higher returns. Retail buying tended to concentrate in speculative names, including stocks linked to prominent local business figures, even as foreign investors withdrew about USD 1 billion — the largest net outflow since 2020. The number of retail investors expanded markedly during the year, and domestic institutional participation also rose. Local economists and brokerage strategists point to faster credit growth and continued domestic demand as factors likely to support the market, with some forecasts projecting the Jakarta Composite Index to reach 11,000 points next year.

The 2025 regional equity cycle highlights the interplay between structural demand drivers, policy shifts and investor composition. Korea’s technology‑led surge, Japan’s valuation repricing and Indonesia’s retail‑driven rally each reflect distinct market dynamics that will shape investor focus in 2026.