The South Korean stock market is experiencing a historic surge. Driven by three key factors—the super cycle of memory chips ignited by the AI wave, the ongoing compression of the &#34;Korean discount,&#34; and the positive alignment of macro policies—the Korea Composite Stock Price Index (Kospi) has accumulated nearly a 50% increase this year, making it the best-performing major stock market globally.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0155a23f-f85f-452d-bd1e-083352e73c95.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0155a23f-f85f-452d-bd1e-083352e73c95.png"/>On Thursday, the Kospi closed above 6300 points for the first time, recording gains on 10 out of the past 11 trading days, continuously setting new historical highs. Deutsche Bank strategist Jim Reid referred to it as &#34;the most extraordinary stock market of 2026,&#34; noting that such an increase &#34;typically requires years or even decades, not weeks.&#34; Goldman Sachs previously raised its year-end target for the Kospi to 5700 points, but the index has already surpassed this target within a week.The direct catalyst for this surge is the vertical rise in memory chip prices—hyperscale cloud computing companies are scrambling to purchase all available DRAM and HBM chips. Samsung Electronics and SK Hynix together account for about 40% of the total market capitalization of the Kospi, with their respective increases of 82.5% and 69.8% this year.Meanwhile, as noted in a previous article by Wall Street Insights, South Korean President Lee Jae-myung, drawing from his early experiences as a &#34;retail investor&#34; who suffered losses in stock trading, has initiated aggressive financial reforms since taking office in June last year. These reforms include strengthening board accountability, reforming dividend taxes, and cracking down on market violations, further amplifying this market rally.<h2>AI Memory Super Cycle: The Core Engine of the Rally</h2>The most direct driving force behind the Kospi's explosive rise comes from the explosive demand for memory chips driven by global AI infrastructure development.The training and inference of large AI models are extremely intensive in their consumption of DRAM and high-bandwidth memory (HBM), with hyperscale cloud computing companies stockpiling chips regardless of cost, pushing memory prices to nearly vertical increases. As a core node in the global memory supply chain, South Korea is the biggest beneficiary of this demand feast.Samsung Electronics and SK Hynix are the absolute main players in this rally. Together, the two companies account for about 40% of the Kospi's market capitalization, with their respective increases reaching 82.5% and 69.8% this year. Goldman Sachs predicts a staggering 75% growth in earnings per share for South Korea by 2026, noting that &#34;it is mainly concentrated in the two companies,&#34; subsequently raising the Kospi's year-end target price to 5700 points—while the index has already far surpassed this target.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/36dd3083-cda5-43b8-a2bf-fdda5176b974.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/36dd3083-cda5-43b8-a2bf-fdda5176b974.png"/>Deutsche Bank pointed out that investors are pricing in stronger demand, firmer pricing, and longer upgrade cycles, with the chip sector leading the entire index. Notably, despite turmoil in other global markets, the Kospi continues to forge its own path, continuously setting new historical highs<h2>&#34;Korean Discount&#34; Compression: Governance Reform Reshapes Valuation Logic</h2>Deutsche Bank states that memory chips are only half of the story. The other half comes from the long-standing structural discount in the Korean capital market, which is being systematically repaired.<blockquote>The Korean stock market has long suffered from valuation discounts due to corporate governance issues—where the interests of controlling shareholders override those of ordinary shareholders, complex cross-shareholding structures, and weak board accountability mechanisms. This &#34;Korean discount&#34; has kept Korean stocks in the lower third of the global valuation rankings for a long time.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f8d01636-01c4-4e0d-a9ba-1d3db7108703.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f8d01636-01c4-4e0d-a9ba-1d3db7108703.png"/></blockquote>An article from Wall Street Insight points out that Lee Jae-myung's personal experience provides a unique background for this reform. According to media reports citing informed sources, he once lost everything in day trading as a side job and attributed his losses to unfair transactions by controlling shareholders that repeatedly eroded the interests of ordinary investors. This experience has become the core motivation for him to push for reform.Since taking office in June last year, Lee Jae-myung has implemented a series of radical measures: revising the scope of fiduciary duties to strengthen board accountability, reforming dividend taxes to encourage payouts, expanding enforcement resources to combat market violations, and announcing a roadmap to seek inclusion in the MSCI developed markets. Namuh Rhee, chairman of the Korea Corporate Governance Forum, stated, &#34;Every promise made by previous governments has been disappointing, but this time is different.&#34;Mixo Das, head of Korean equity strategy at JP Morgan, holds a cautious view, noting that &#34;reform is important and does help valuations, but to say that the Kospi will rise to 5000 solely due to government policy may exaggerate the impact.&#34;<h2>Macro Tailwinds: Central Bank Easing and Improved Growth Expectations</h2>The third driving force comes from positive macro-level coordination.The Bank of Korea recently raised its economic growth forecast and clearly stated that it does not expect to adjust its policy stance in the next six months, maintaining an accommodative monetary environment.This statement provides strong liquidity support for the stock market, although the continuous rise in Seoul's housing prices puts some pressure on policymakers. Deutsche Bank economist Juliana Lee has recently been more optimistic about the Korean economy than the market consensus.From a longer-term perspective, this round of recovery in the Korean stock market is historically significant. Deutsche Bank data shows that the Kospi only truly broke through the historical high of March 1989 last September, marking a full 36 years since that peak.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/abcb51df-1d4f-4f9a-97c4-9cd27ec6f98d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/abcb51df-1d4f-4f9a-97c4-9cd27ec6f98d.png"/><h2>Asset Reallocation: The Era of Real Estate May Come to an End</h2>It is noteworthy that a previous article from Wall Street Insight mentioned that this stock market surge is quietly changing the wealth allocation logic of Korean households: the reform has shifted the wealth concept of Koreans from excessive asset concentration to financial investmentReal estate once accounted for nearly three-quarters of South Korean household assets. Peter S. Kim, a global investment strategist at KB Securities, stated, &#34;The excessive concentration of real estate relative to financial assets is about to reverse, which is one of the most profound trends in Korea over the next decade.&#34;KB Financial Group's latest report also pointed out that the allocation priorities of high-net-worth individuals between domestic real estate and stocks have become more aligned, which is a rare signal of rising market interest.Lee Jae-myung himself endorsed the stock market with concrete actions—he purchased domestic stock market ETFs worth 40 million won (approximately $27,600) just days before the election last June and promised to invest 1 million won monthly after being elected. As of September last year, this batch of investments had achieved a return rate of 26.4%.This surge has also earned Lee Jae-myung the reputation of a &#34;people's hero&#34; among South Korea's 14 million retail investors. According to a Gallup Korea survey, his approval rating rose to 63% in mid-February this year, reaching a new high in over three months.<h2>Risks Remain: Bubble Warnings and Structural Concerns</h2>However, Jim Reid of Deutsche Bank has issued a clear warning.According to Deutsche Bank's long-term valuation research framework, this round of rapid gains in the South Korean stock market has pushed it from the &#34;undervalued&#34; camp into the &#34;overvalued&#34; camp. Reid wrote, &#34;In the long run, valuations will ultimately prevail, and this shift is worth watching.&#34;<blockquote>A more immediate risk is that this rally heavily relies on the continued rise in memory prices. Once memory prices reverse, Samsung and SK Hynix will be the first to suffer, leading to a sharp correction in the Kospi and potentially forcing the Bank of Korea to intervene passively.</blockquote>Macroeconomic risks are also not to be overlooked. The South Korean economy contracted in the fourth quarter, and its export-oriented economic structure makes it highly sensitive to global demand shocks. South Korean households carry one of the highest debt burdens in the world, which Lee Jae-myung himself referred to as a &#34;ticking time bomb.&#34;Meanwhile, some retail investors remain cautious about the domestic market, with capital continuing to flow out and record amounts pouring into the U.S. stock market, further suppressing the won.Risk Warning and DisclaimerThe market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk

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The South Korean stock market has surged due to a spike in demand for memory chips driven by the AI wave, with the Kospi index rising nearly 50% this year, closing above 6300 points for the first time. Deutsche Bank has called it "the most extraordinary stock market of 2026." Samsung Electronics and SK Hynix have risen 82.5% and 69.8% respectively this year, together accounting for about 40% of the Kospi's market value. Financial reforms promoted by South Korean President Yoon Suk-yeol have also contributed to the market's performance. Goldman Sachs has raised its year-end target for the Kospi to 5700 points, but the index has already surpassed this target

- The South Korean stock market is experiencing unprecedented growth, with the Kospi index rising nearly 50% this year due to three main drivers: a boom in AI-driven memory chip demand, a reduction in the "Korean discount," and supportive macroeconomic policies.  
- Major players Samsung Electronics and SK Hynix, which together make up about 40% of the Kospi's market value, have seen stock increases of 82.5% and 69.8% respectively amid strong demand for DRAM and HBM chips.  
- Despite the impressive gains, warnings about potentially overvaluing the market and reliance on memory prices persist, raising concerns about future stability amidst a shrinking export-driven economy.

The South Korean stock market explodes, not just in storage