🚨 KOSPI 3000 Era Returns: Foreign Investment of 6 Trillion Won Breaks 3-Year 6-Month High

Today Korean Economic News | 2025.06.21

📌 Foreign Money Returns, Opening KOSPI 3000 Era Again

💬 The KOSPI index has broken through the 3000 level for the first time in 3 years and 6 months. With the weak dollar trend, over 6 trillion won of foreign investment has flowed in, and the strength of new leading stocks like shipbuilding and defense, along with expectations for government capital market reforms, has driven the index higher. The KOSPI has risen over 25% this year, recording the highest growth rate among major global stock markets. Particularly noteworthy is that mid-to-large industrial stocks led the index rise, unlike the previous large-cap centered growth. Experts analyze this as a result of President Trump's weak dollar policy, resolution of Korean stock market undervaluation, and the government's commitment to improving corporate governance working together.

1️⃣ Easy to Understand

Korea's main stock index, the KOSPI, has finally broken through the 3000 level. This is the first time in 3 years and 6 months, meaning the Korean stock market has regained its energy.

KOSPI stands for Korea Composite Stock Price Index, and it's the main indicator showing how our country's entire stock market is performing. Like the average score of a whole class, when the KOSPI index goes up, it means stock prices have generally risen, and when it goes down, it means they have fallen.

Why is the number 3000 important? In stock markets, numbers like 1000, 2000, and 3000 are called "psychological resistance levels." It's like getting over 90 points on a test - these are very meaningful benchmarks for investors. The KOSPI went over 3000 at the end of 2021, but then fell and stayed in the 2000s from 2022. Now it has crossed 3000 again.

The biggest driving force behind this rise is the renewed interest from foreign investors. Until last year, foreigners kept selling Korean stocks, but starting in May this year, they began buying heavily. In just the two months of May and June, over 6 trillion won flowed in. This signals that foreigners are starting to see the Korean stock market as attractive again.

Why did foreigners suddenly become interested in Korea? There are several reasons. First, President Trump's weak dollar policy made investing in emerging markets more attractive. Second, they judged that Korean stocks were relatively undervalued compared to other countries. Third, the Korean government's announcement to improve corporate transparency and pursue shareholder-friendly policies was also positively received.

Another characteristic of this rise is that the leading stocks changed. In the past, large tech stocks like Samsung Electronics and SK Hynix drove the index up, but this time, companies in shipbuilding, defense, electrical equipment, and nuclear power were the stars. Hyundai Heavy Industries, Hanwha Systems, and LS Electric are good examples.

The KOSPI breaking 3000 means more than just a number. It's a signal that global investors' trust in the Korean economy and companies is being restored.

2️⃣ Economic Terms

📕 KOSPI

KOSPI is short for Korea Composite Stock Price Index, Korea's main stock index.

• It's a market cap-weighted index calculated from all stocks listed on the Korea Exchange.
• It was set at 100 on January 4, 1980, as the base point and has been calculated since then.
• When KOSPI rises, it means the overall stock market is doing well; when it falls, it means the market is struggling.

📕 Foreign Investment

Foreign investment means overseas investors putting money into the domestic stock market.

• Foreign net buying means they are buying more than selling, which is a factor for stock price increases.
• Foreign money inflow provides liquidity to the domestic stock market and drives stock prices up.
• Conversely, foreign money outflow can create downward pressure on stock prices and upward pressure on exchange rates.

📕 Weak Dollar Policy

Weak dollar policy means the US intentionally trying to lower the value of the dollar.

• When the dollar weakens, other countries' currencies relatively strengthen, making overseas investment more attractive.
• It has the effect of improving US export competitiveness and trade balance.
• It increases capital inflow to emerging markets, positively affecting those countries' stock markets.

📕 Market Cap Weighted Average

Market cap weighted average is a calculation method that gives different influence to the index based on company size.

• Companies with larger market caps have greater influence on index changes.
• Stock price changes of large companies like Samsung Electronics have bigger impact on KOSPI.
• This reflects economic scale more accurately, but can be biased toward large-cap stocks.

3️⃣ Principles and Economic Outlook

✅ Background and Meaning of Foreign Investment Inflow

• Let's analyze why foreign investors returned to the Korean stock market and its impact.

  • First, President Trump's weak dollar policy increased the attractiveness of emerging market investments. As the US deliberately pursued policies to lower the dollar's value, other countries' currencies relatively strengthened. Particularly, as the won/dollar exchange rate fell from the 1,380 won range to the 1,320 won range, Korea became more attractive to foreigners. In dollar terms, Korean stocks became cheaper in real terms. Also, as inflation pressure in the US decreased, pressure for Federal Reserve rate hikes eased, making capital movement to emerging markets more active. This is interpreted as an important turning point away from the "strong dollar → emerging market capital flight" pattern since the 2008 financial crisis.

  • Second, Korea's structural undervaluation began to be resolved. The Korean stock market had long been in an undervalued state called the "Korea Discount." The price-to-book ratio (PBR) was around 0.8-0.9 times, trading below book value, and dividend yields were also low compared to other developed countries. However, as the government recently announced it would actively pursue corporate governance improvements and shareholder return policies, expectations rose that these discount factors would improve. Particularly, as major companies announced share buybacks and dividend increases, foreigners began to positively evaluate Korean companies' shareholder-friendly changes.

  • Third, Korea's strategic value in global supply chain restructuring was highlighted. Amid ongoing US-China conflicts, Korea is playing a key role in global supply chains while maintaining balance between the two countries. Particularly, Korea's main industries like semiconductors, batteries, and shipbuilding gained recognition for their global competitiveness, increasing investment attractiveness. The AI boom led to surging semiconductor demand, and the green energy transition brightened prospects for battery and nuclear power companies. This structural change leading to medium-to-long-term investment fund inflow rather than short-term speculative money is significant.

• Foreign investment inflow is an important signal showing changes in Korea's global stock market status. It can be seen as starting to break away from being an emerging market vulnerable to external shocks and being recognized as a stable investment destination.

✅ Emergence of New Leading Stocks and Industrial Structure Changes

• Let's look at the new leading stocks that drove this KOSPI rise and industrial trend changes.

  • First, the shipbuilding industry's revival drove stock market gains. Stock prices of the Big 3 shipbuilders - Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering - rose over 50% from the beginning of the year. This is because orders for high-value ships like LNG carriers and container ships surged due to strengthened global environmental regulations. Particularly, Korean shipbuilders monopolize over 80% of the global LNG carrier market, with order backlogs piled up for 3-4 years. The shipbuilding industry was once a target for restructuring, but is now being reevaluated as a future growth engine. The global trends of carbon neutrality and energy transition have become golden opportunities for Korean shipbuilding.

  • Second, defense stocks' strength stood out amid geopolitical risks. Defense-related companies like Hanwha Systems, Hanwha Aerospace, and LIG Nex1 rose significantly. This is because geopolitical tensions like the Russia-Ukraine war and Middle East conflicts are increasing, leading to rising defense spending in various countries. Particularly, Korea's K-defense industry is gaining attention in the global market with performance proven in the Ukraine war. Large export contracts with Eastern European countries like Poland and Romania have also been signed, raising expectations for defense companies' performance improvements. This is evaluated as highly sustainable because it's based on actual orders and sales increases, not just theme stock rises.

  • Third, nuclear power-related stocks rapidly emerged due to energy policy changes. Nuclear power generation companies like Doosan Enerbility, KEPCO E&C, and KEPCO KPS are gaining attention. Nuclear power is being reevaluated globally to achieve carbon neutrality goals, with particularly growing interest in next-generation nuclear technology like Small Modular Reactors (SMR). As a nuclear technology powerhouse, Korea has expanding overseas opportunities, with increasing possibilities of winning large projects in Czech Republic, UK, and other countries. Such structural changes are brightening the long-term growth prospects of related companies.

• The emergence of new leading stocks shows that Korea's economic industrial structure is changing. It means securing global competitiveness in various fields like energy, defense, and heavy industry, moving away from the past IT-centered focus.

✅ Impact of Government Policies and Institutional Improvements

• Let's analyze the positive impact of government capital market reform policies on the stock market.

  • First, corporate governance improvement policies increased investor confidence. The government is actively pursuing policies to improve corporate management transparency and protect shareholder rights. These include strengthening independence of outside directors, expanding audit committee authority, and reinforcing disclosure obligations. It's also encouraging major companies to resolve circular shareholding and transition to holding company structures. These changes improve structural problems of Korean companies that foreign investors have long pointed out, significantly increasing investment attractiveness. Many major companies are voluntarily announcing governance improvement plans, showing policy effects.

  • Second, strengthened shareholder return policies sparked a dividend stock investment boom. The government is implementing policies to encourage companies to return more profits to shareholders. Main contents include dividend income tax reductions, easing share buyback regulations, and mandatory disclosure of shareholder return rates. Accordingly, many companies are increasing dividends or expanding share buybacks. Particularly, sectors with stable cash flows like banking, insurance, and telecommunications are notably expanding dividends. This provides direct returns to investors while contributing to stock price increases.

  • Third, capital market regulatory improvements are driving investment activation. The government is implementing policies to improve capital market soundness, including normalizing short-selling regulations, expanding institutional investor obligations, and strengthening individual investor protection. It's also increasing long-term investment fund inflow to stock markets through expanding pension funds' equity investment limits and introducing default options for retirement pensions. Such institutional infrastructure improvements are gaining investors' trust by increasing market stability and predictability. Particularly, foreign investors are positively evaluating Korea's institutional development and increasing investments.

• Government policy changes focus on improving investment attractiveness through structural improvements rather than simple stimulus measures. This can be seen as meaningful change that lays the foundation for sustainable stock market growth.

4️⃣ In Conclusion

KOSPI breaking 3000 has meaning beyond just numbers. This signals that the Korean stock market has escaped from 3 years and 6 months of stagnation and entered a new growth trajectory, showing a symbolic event of changing global investors' perception of Korea.

The biggest characteristic of this rise is massive foreign investment inflow. Over 6 trillion won of foreign investment funds flowing in means global investors' trust in the Korean stock market has been restored. This is particularly the result of President Trump's weak dollar policy, resolution of Korean companies' undervaluation, and government institutional improvement efforts working together.

The change in leading stocks is also noteworthy. Moving away from the past focus on large tech stocks like Samsung Electronics and SK Hynix, mid-to-large stocks in various industrial sectors like shipbuilding, defense, and nuclear power led the rise, showing the expansion of Korea's economic base. This suggests the possibility of balanced growth not dependent on specific sectors.

Government capital market reform policies also had positive effects. Corporate governance improvements, strengthened shareholder return policies, and capital market regulatory normalization contributed to increasing investors' trust. This is evaluated as preparing a foundation for sustainable growth through structural improvements rather than short-term stimulus measures.

However, there are still factors to watch out for. Uncertainties in the US economy, China's economic slowdown, and geopolitical risks remain as variables. Domestically, weak domestic demand and household debt problems could hold back economic growth.

Nevertheless, KOSPI breaking 3000 is a positive signal showing that Korea's economic and stock market fundamentals are becoming solid. If this trend continues, we can expect the Korean stock market to further enhance its status as a major Asian financial hub.