Samsung and SK Hynix Drive Over Half of the Kospi’s Recent Historic Gains

Despite a historic $1.7 trillion surge in market capitalization, South Korean equities continue to trade at a noticeable discount compared to their global counterparts, according to leading fund managers. Since the beginning of 2025, the Kospi Index has surged by more than 100%, propelled by a global surge in artificial intelligence and President Lee Jae Myung’s aggressive legislative efforts to dismantle the "Korea discount." This term refers to the chronic undervaluation of Korean firms due to opaque corporate governance. Investors from firms such as Matthews Asia and Jupiter Fund Management suggest that while valuations have risen, they have not yet caught up to the robust earnings growth projected for the region.

This persistent undervaluation has sparked significant optimism on Wall Street. Analysts at JPMorgan Chase & Co. have projected that the Kospi could reach the 7,500 level, representing a potential 41% increase from its current standing. However, experts maintain that such growth is contingent upon sustained reforms in corporate governance. Currently, the rally has been concentrated heavily in the semiconductor sector, specifically through Samsung Electronics Co. and SK Hynix Inc., suggesting that a broader market recovery could provide further momentum. Portfolio managers note that when measured against strong fundamentals and profit outlooks, the market remains fundamentally undervalued.

Comparative data highlights this valuation gap. Although the Kospi’s price-to-book ratio has improved from below 1.0 to 1.7 over the past year, it still trails Japan’s Topix at 1.9 and China’s CSI 300 at 1.8. Political leaders, including Democratic Party chief Jung Chung-rae, have pointed out that Korea’s ratio remains well below the average of 3.0 seen in advanced economies. The discrepancy is even more pronounced regarding future earnings; while Kospi profits are expected to double over the next year, Japanese and Chinese firms are projected to see much more modest growth of 12% and 24%, respectively.

Even the tech giants driving the current rally appear inexpensive relative to their peers. Samsung and SK Hynix trade at forward earnings multiples of 7.9 and 5.7, respectively—figures that pale in comparison to the multiples of 19 for TSMC or 24 for Nvidia. Analysts suggest that increased dividend payouts and the mandatory cancellation of treasury shares could trigger a significant re-rating of these stocks. Ultimately, the long-term success of these reforms depends on the cooperation of South Korea’s powerful family-run conglomerates, or chaebols. Investors remain eager to see if policy shifts will translate into genuine improvements in return on equity and better protections for minority shareholders.