KOSPI Surpasses Taiwan, Closes in on India to Rank Fifth Globally by Market Capitalization

Led by Samsung Electronics and SK hynix, KOSPI's Market Cap Doubles This Year

Still Lags Far Behind Taiwan, Its Semiconductor Rival, Due to Low Dividends

PER: Taiwan TAIEX at 19.8x, KOSPI at Only 8.39x

The Korean stock market, now considered the greatest beneficiary in the era of the artificial intelligence (AI) revolution, has, for the first time in history, ranked fifth in the world by market capitalization. This was made possible thanks to the explosive rallies of the top two KOSPI stocks, Samsung Electronics and SK hynix, whose share prices have soared by 160% and 250% respectively since the beginning of this year. With the ongoing shortage of memory semiconductors and further improvement in earnings expected, the prevailing view is that the market remains undervalued and the upward trend will likely continue.

AI Boom Propels KOSPI to Fifth-Largest Stock Market Globally

According to MacroMicro, a global data analytics platform, as of May 29, the KOSPI's market capitalization reached approximately $4.54 trillion (6,827 trillion won), making it the fifth largest in the world. The United States ranked first, with a total market capitalization of $75.52 trillion. China, including Hong Kong, was second with $22.86 trillion, followed by Japan at $8.7 trillion and India at $4.92 trillion. Canada ($4.53 trillion), Taiwan ($4.37 trillion), and the United Kingdom ($3.98 trillion) followed South Korea in sixth to eighth place.

The KOSPI’s market capitalization, which was around 3,400 trillion won at the start of the year—about half the current level—has doubled in just five months to exceed 6,800 trillion won. At the center of this growth are Samsung Electronics and SK hynix. The share price of Samsung Electronics, the top company by market capitalization, has soared 160%, rising from 120,000 won at the beginning of the year to over 310,000 won. Over the same period, SK hynix surged from 650,000 won to 2.3 million won, up 250%. This is a direct result of the explosive growth in AI industries and the resulting spike in demand for memory semiconductors.

Despite the sharp rally in the Korean market, securities analysts believe that, compared to other countries, it remains attractively priced and has ample room for further gains. Based on MSCI’s 12-month forward price-to-earnings ratio (PER), the U.S. stands at 21.5 times, Japan at 17 times, Europe at 14.9 times, and China at 11.1 times, while Korea’s is still just 8 times.

Korean Market Still Undervalued Compared to AI Rival Taiwan

The undervaluation of Korean stocks is even more pronounced when compared to Taiwan, a competitor in the AI semiconductor space. The 12-month forward PER of the Taiwan Stock Exchange Weighted Index is 19.8 times, nearly double that of Korea. In terms of the 12-month trailing price-to-book ratio (PBR), which measures share price relative to book value, Taiwan posts 3.87 times, while the KOSPI lags at just 2.08 times.

When it comes to “12-month forward return on equity (ROE),” which indicates a company’s actual profitability, the KOSPI leads at 23.47%, compared to Taiwan’s 19.53%. In other words, even though Korean companies are delivering higher margins and profits, their stocks trade at much lower valuations.

Even when comparing Samsung Electronics and SK hynix to TSMC, Korea’s stocks are significantly cheaper. According to FnGuide and others, Samsung Electronics’ estimated operating profit for this year is 349 trillion won, and SK hynix’s is 254 trillion won. By comparison, the world’s top foundry, Taiwan’s TSMC, is expected to post an operating profit of 2.764 trillion Taiwan dollars (approximately 132 trillion won) this year—a figure far lower than those of the Korean firms.

In comparing the dominance of semiconductors within the overall market, the Korean stock market’s fundamentals appear much more robust. Currently, TSMC alone accounts for 55% of Taiwan’s total market capitalization. In contrast, the combined share of Samsung Electronics and SK hynix in the KOSPI is about 50%. The KOSPI is regarded as having greater earnings stability than Taiwan, as it is underpinned by a broad manufacturing base that includes shipbuilding, defense, and power equipment—not just semiconductors.

The unprecedented undervaluation of the Korean stock market is also evident when comparing the ratio of market capitalization to nominal gross domestic product (GDP). In Taiwan, the market capitalization is 404.0% of nominal GDP ($97.67 billion), reflecting a significant premium in asset prices. In Korea, however, the ratio is only 210.3% of nominal GDP ($1.93108 trillion), meaning stock prices are significantly lower relative to the size of the national economy compared to Taiwan.

One of the main reasons cited for the undervaluation of the Korean market relative to Taiwan is the relatively low shareholder return rate. Taiwan’s stock market has a dividend payout ratio of 50.31% and a dividend yield of 1.71%, while the KOSPI’s payout stands at 18.51% and the yield at 0.93%—less than half those levels. Some analysts also attribute the undervaluation to the cyclical nature of the memory semiconductor industry. However, with recent memory chip contracts increasingly shifting toward long-term agreements (LTAs), earnings stability is improving.

Jihyun Kim, a researcher at Daol Investment & Securities, said, "Currently, the forward PER of the Taiwanese market is more than twice that of the KOSPI. If various uncertainties ease in the second half of the year, the environment will be conducive to a recovery in multiples and an additional rally."

This content was produced with the assistance of AI translation services.