Toward a Second “Buy Korea”
A KOSPI Rally Sparked by Commercial Law Reform Shifts in the Industrial Landscape Are the Key
During the Asian financial crisis of 1997, South Korea sought a bailout from the International Monetary Fund (IMF). Although the country officially exited the IMF program in August 2001, the “Buy Korea” fund launched in 1998 played a pivotal role in encouraging public participation in a deeply depressed capital market. At the time, television advertisements highlighting that the combined market capitalization of all listed Korean companies stood at just KRW 137 trillion—smaller than that of a single major foreign corporation—struck a chord with investors.
As of July 2025, the combined market capitalization of the KOSPI and KOSDAQ has finally surpassed KRW 3,000 trillion. Yet this figure still falls short of the market value of a single U.S. mega-cap stock, such as Nvidia at USD 4.2 trillion, Microsoft at USD 3.8 trillion, or Apple at USD 3.2 trillion. The gap appears even wider when factoring in an exchange rate above KRW 1,300 per dollar.
Until last year, Korea’s stock market—often disparagingly referred to as “Gukjang” (short for “domestic market”)—was viewed through a largely pessimistic lens. That sentiment began to shift early this year as a series of market-friendly measures, including revisions to the Commercial Act and the introduction of separate taxation for dividend income, fueled a re-rating of Korean equities. While expectations surrounding regulatory reform played a role, a substantial portion of the rally likely reflected pent-up buying after years of underperformance relative to developed markets. The question remains, however, whether institutional reforms alone can truly usher in an era of KOSPI 5,000.
In December 2019, Samsung Electronics—including preferred shares—accounted for 24.6% of the KOSPI. By June 2025, its weight had declined to around 16%. This signals the end of an era in which the KOSPI’s direction could be inferred largely from the movements of a single stock.
The sector composition of the KOSPI has always been in flux. The chemicals sector, which now accounts for just 5.56% of the main board, represented 12.17% in 2010 during the so-called “Cha-Hwa-Jung” rally. The utilities sector, including Korea Electric Power, has shrunk dramatically—from 9.84% in 2000 to just 1.27% today.
The IT (electronics) sector expanded from 21.2% in 2000 to 36.06% by 2020. Pharmaceuticals, which made up a mere 0.84% in 2000, grew to 7.95% by 2020. Transportation equipment, including autos and shipbuilding, nearly doubled its share from 5.72% in 2000 to 11.85% today. These shifts underscore the constantly evolving nature of Korea’s industrial map.
Ultimately, the key to investing in Korean equities lies not in lamenting the domestic market while fixating on familiar blue-chip names, but in reading the changing industrial landscape and identifying sectors poised to lead the market anew.
In 2024, South Korea—not France—ranked as the largest exporter of cosmetics to the United States. The success of “K-Pop Demon Hunters” illustrates how K-pop has evolved beyond a passing trend into a fully established genre. The fact that Hanwha Aerospace (012450) now ranks fifth by market capitalization is increasingly accepted as the new normal. A second “Buy Korea” should not appeal merely to patriotism, but rather be centered on companies that are shaping the future of the market.
On July 8, Samsung Active Asset Management launched the KoAct K-Export Core Companies TOP30 Active ETF, built on actual export data. Despite being an export-focused ETF, Samsung Electronics accounted for less than 3% of the underlying index. Instead, the fund drew attention for its exposure to next-generation export leaders in defense, cosmetics, and K-food. Whether it will become a modern incarnation of the “Buy Korea” fund remains to be seen.
According to brokerage reports, second-quarter operating profits reported so far by Korean companies have fallen short of expectations, suggesting the possibility of near-term profit-taking after recent gains. Nevertheless, confidence remains strong in the sustainability of growth among leading companies across key industries. From a supply-and-demand perspective, the rapid pace of domestic equity ETF development by asset managers is also supportive.
Despite lingering concerns over tariffs and economic conditions, one can hope that a virtuous cycle between capital markets and the real economy will take root—allowing Korea to emerge as a country where innovation and investment once again define the national narrative.