South Korea's Kospi hits record high—but only a few stocks are driving gains
South Korea’s Kospi index surged to a record high in May, closing at 8,476.15 on Friday. The 28 percent jump was driven more by investor expectations than actual earnings growth, raising concerns about future volatility in the market. The rally saw only 12 percent of Kospi-listed stocks rise in May, while 86 percent fell. Most gains came from large-cap semiconductor and power-related shares, creating a concentrated market push.
Earnings contributed 8.5 percentage points to the index’s 24 percent gain, with price-to-earnings ratio (PER) expansion accounting for 15.5 points. This marks the first time this year that PER growth has outweighed earnings in a single month. Among sectors, only electrical and electronics outperformed the Kospi’s return. The remaining 21 sectors trailed behind. Despite the rally, earnings fundamentals stayed steady, supporting 126 percentage points of the Kospi’s 94.2 percent rise since January. Analysts warn that profit-taking in leading shares could heighten volatility. The disconnect between expectations and actual earnings may amplify market swings in the coming weeks.
The Kospi’s record close reflects strong investor optimism, but risks remain. With only a few sectors and stocks driving gains, the market’s reliance on expectations rather than earnings could lead to sharper corrections. Expectations for further growth persist, though volatility may rise if profit-taking accelerates.
