Korean stock market surged by 78% on the B side: excluding Samsung and SK Hynix, is this just a "retail gambit"?

The performance of the Korean stock market this year is indeed amazing. From the beginning of the year to now, the KOSPI index has soared by 78%, far exceeding the 7% increase of the MSCI World Index of developed markets during the same period, and significantly outperforming the 23% performance of the MSCI Emerging Markets Index. Such an increase is enough to attract global attention and has fueled unprecedented enthusiasm among the Korean people for stock market investment. However, this "amazing" performance is actually a "solo" performance by a few giants - Samsung Electronics and SK Hynix, two companies that have contributed the vast majority of this round of KOSPI index gains. If the impact of these two stocks is removed, the KOSPI index's increase would shrink significantly to 30%, leaving behind a mediocre performance. Even though the AI boom may continue to drive these two memory chip giants higher, their absolute dominance reflects the fatal flaw in the Korean stock market as a savings destination for ordinary investors, revealing the fragile nature of the current market prosperity. For investors, concentrated holdings have always been a double-edged sword: in the past five years, investors focusing on technology stocks have achieved returns well above the benchmark through precise holdings, but economic cycles and industry trends are inevitable, and in the long run, diversified investment is the time-tested and most prudent way to preserve and increase wealth. In fact, even professional investors rarely continue to win in the "stock-picking game" in the long term, let alone ordinary retail investors lacking professional knowledge and risk awareness. The AI revolution is pushing the concentration of the KOSPI index to the extreme. What is more concerning is that the two giants leading the index are in the highly cyclical semiconductor industry - an industry characterized by "extreme highs and lows", where prosperity and recession often alternate in a short time. Although many Wall Street analysts believe that the current shortage of memory chips may last longer than expected, forming a so-called "super cycle", this does not mean that the cyclical pattern is broken. The profit fluctuations in the global semiconductor industry are huge, and after a short period of prosperity, oversupply and profit margin contraction often follow. Looking at the changes in the weight of the electronics and electrical equipment sector in the Korean stock market in recent years, the continued increase in industry concentration is further amplifying the volatility of the Korean stock market. Centralization has never been the path to stable wealth creation, and "stability" is precisely the core demand of long-term investment. The biggest problem with the KOSPI index is that its returns exhibit an extremely "pulse-like" characteristic - since the early 1990s, the compound annual growth rate of the index has been 7.3%, but almost all capital gains have concentrated in 10 to 11 calendar years. In other words, the index is in an upward cycle for less than a third of the time, and the rest of the time is either sideways consolidation or sharp correction. A more direct comparison is: since 1990, the KOSPI index has reached historical highs only 264 times, with the longest "new high drought" lasting over a decade; while the United States, with a mature retail investment culture, the S&P 500 index has hit 780 historical highs during the same period, showing a significant disparity in stability. The sharp fluctuations and pulse-like rises of the KOSPI index create a risky investment environment, especially dangerous for ordinary investors. Human instinct is to dislike losses (even though patience can recoup losses in the long run), and investors hope that their investment portfolios will show a steady upward trend. But when the market swings too much and returns are highly uncertain, investors often fall into the trap of "chasing highs and killing lows" - frequent trading, counter-trend operations, ultimately deviating from their long-term interests. Without mitigating this "pulse-like" return characteristic, it is impossible to truly guide investors to make rational investment decisions. This raises the question: Is the Lee Myung-bak government really trying to cultivate a responsible long-term investment culture, or is it creating a "gambling market" for short-term trading for all? He used the rhetoric of short-term traders, promising a breakthrough of the KOSPI index above 5000 points as an election pledge, and even called himself the "big ant" (the term for Korean short-term retail investors). In fact, when he took office, the Korean stock market already had a serious speculation tendency, and such a direction will undoubtedly further exacerbate market irrationality. From a policy perspective, although South Korea has tax incentive policies to encourage long-term holding of stocks, there are still significant shortcomings compared to the United States - lower investment limits make it difficult to truly guide investors for long-term allocation. Even though the popularity of exchange-traded funds (ETFs) is increasing, Korean retail investors often use them as high-risk speculative tools: the most popular products among Korean retail investors include leveraged ETFs, which seek multiple times daily returns of specific stocks or indices through derivatives, but also come with extreme downside risks, especially in turbulent or bear markets, which may cause investors catastrophic losses. Setting aside the rhetoric, the Lee Myung-bak government has indeed introduced some substantive reforms, such as the recent corporate governance reform aimed at protecting the interests of small and medium shareholders. But to cultivate a truly long-term stable investment culture that serves the voters, he needs to do more: update tax incentive policies, guide investors to make efficient investments and retirement financial planning; encourage more entrepreneurial activities and initial public offerings (IPOs), and break the market monopoly. However, the latter is extremely difficult in South Korea - family-controlled chaebols, which are far larger than all other companies, even if efforts are made to curb chaebol influence, it will take decades to see results. In the absence of rapid changes in the chaebol monopoly situation, the most responsible way to help the Korean people achieve wealth preservation and growth is to guide them to build truly diversified investment portfolios, including a significant allocation of overseas stocks. However, Lee Myung-bak's government is going in the opposite direction - criticizing overseas stock investments, shaping investment in the Korean stock market as a "patriotic duty", which will further bind ordinary investors to this highly concentrated, volatile market, increasing their investment risk. In the end, the extreme performance of the Korean market is a mirror: it reflects the short-term enthusiasm that concentrated betting may bring, while clearly illustrating the potential risks of falling without diversified protection. At a time when global technology assets are in high demand, this "chip myth" lesson for all investors is that what can survive the cycles is not a particular precise bet, but systematic diversification, restraint, and patience.