A senior official from South Korea's public pension system recently suggested the country's stock market rally is driven by two powerful, equally important forces.
First, there's the undeniable impact of the AI-led semiconductor super-cycle. The Korean stock market is heavily concentrated, with giants like Samsung Electronics and SK hynix making up over 40% of key indices like the EWY ETF. This means that when these two companies do well, the entire market tends to follow. Their recent performance has been remarkable, contributing to roughly two-thirds of the index's year-to-date gains in early 2026. This isn't just stock market sentiment; it's backed by real economic data. South Korea's exports have hit record highs, powered almost entirely by surging demand for advanced memory chips like HBM, which are crucial for AI development. This narrative is fundamentally about strong earnings growth.
Second, and equally significant, is the government's 'Corporate Value-Up Program.' This series of reforms, rolled out since 2024, is designed to tackle the long-standing 'Korea Discount'—the tendency for Korean companies to be valued lower than their global peers. By offering tax incentives and requiring companies to disclose plans to improve shareholder value, the program has sparked a re-evaluation of many non-tech companies. The proof is in the performance of the new KRX Value-Up Index, which has consistently outperformed the broader market. This narrative is about a structural re-rating of the market, where investors are willing to pay a higher price for the same level of earnings because they see improved governance and shareholder returns.
So, the 50/50 attribution makes perfect sense. The rally isn't just a cyclical tech boom, nor is it purely a policy-driven sentiment shift. It's a powerful combination of both. The semiconductor upcycle provides the immediate, powerful earnings momentum, while the Value-Up program lays the groundwork for sustainable, long-term value creation across the entire market. These twin engines, working in tandem, have propelled the Korean market to new heights.
- Corporate Value-Up Program: A set of government policies aimed at resolving the 'Korea Discount' by encouraging companies to improve corporate governance and shareholder returns.
- HBM (High Bandwidth Memory): A type of high-performance memory chip essential for powering AI accelerators and data centers.
- Re-rating: A change in investor perception that leads to a higher valuation multiple (like the price-to-earnings ratio) for a stock or an entire market, even without an immediate change in earnings.