KOSPI Surpasses Taiwan, Closes in on India to Rank 5th 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 the biggest beneficiary of the artificial intelligence (AI) revolution, has, for the first time in history, ranked fifth in the world by market capitalization. This achievement is thanks to the explosive surges in the stock prices of KOSPI's top two companies, Samsung Electronics and SK hynix, which have soared by 160% and 250% respectively since the beginning of the year. As memory semiconductor supply shortages persist and further business performance improvements are anticipated, the prevailing outlook is that the market remains undervalued and the rally is likely to continue.

KOSPI Rises to 5th Place Globally Amid the AI Boom

According to the global data analytics platform MacroMicro, as of May 29, the KOSPI’s market capitalization stood at approximately $4.54 trillion (6,827 trillion won), ranking fifth worldwide. The United States ranked first with a market cap of $75.52 trillion, followed by China (including Hong Kong) in second place with $22.86 trillion, Japan in third with $8.7 trillion, and India in fourth with $4.92 trillion. Canada ($4.53 trillion), Taiwan ($4.37 trillion), and the United Kingdom ($3.98 trillion) followed South Korea, taking the 6th to 8th spots.

At the beginning of the year, KOSPI’s market capitalization was about 3,400 trillion won, nearly half its current level. In just five months, it has doubled to surpass 6,800 trillion won. At the heart of this growth are Samsung Electronics and SK hynix. The stock price of Samsung Electronics, the market cap leader, has surged 160% from 120,000 won at the start of the year to over 310,000 won. Over the same period, SK hynix has skyrocketed 250% from 650,000 won to 2.3 million won. The explosive growth of the AI industry has driven a surge in demand for memory semiconductors, fueling this rally.

Despite the rapid rise in the Korean stock market, analysts believe it remains inexpensive compared to other countries, meaning further gains are highly possible. 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 is still only around 8 times.

Korea’s Valuation Still Undervalued Compared to AI Rival Taiwan

The undervaluation of the Korean market is particularly evident when compared to Taiwan, a competitor in AI semiconductors. Taiwan’s TAIEX 12-month forward PER is 19.8 times, double that of Korea. Taiwan's 12-month trailing price-to-book ratio (PBR), which measures share price relative to book value, stands at 3.87 times, whereas KOSPI’s is only 2.08 times.

In terms of real corporate profitability, KOSPI’s 12-month forward return on equity (ROE) is 23.47%, outpacing Taiwan’s 19.53%. This means Korean companies are generating higher margins and profits, yet their share prices are much cheaper.

Even when comparing Samsung Electronics and SK hynix to TSMC, the gap is clear. 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. These numbers are overwhelming when compared to Taiwan's TSMC—the global leader in foundries—whose expected operating profit for this year is 2.764 trillion Taiwan dollars (about 132 trillion won).

Looking at the dominance of semiconductors within the overall market, Korea’s fundamentals are much stronger. In Taiwan’s market, a single stock—TSMC—accounts for 55% of total market capitalization. Meanwhile, in Korea’s KOSPI market, the combined market cap of Samsung Electronics and SK hynix amounts to about 50%. In addition to semiconductors, KOSPI has a broad manufacturing base, including shipbuilding, defense, and power equipment, making its profit structure more stable than Taiwan’s.

The unprecedented undervaluation of the Korean market is also evident in the ratio of market capitalization to nominal gross domestic product (GDP). Taiwan’s market cap to nominal GDP (USD 97.67 billion) ratio is 404.0%, reflecting a significant premium in asset prices. In contrast, Korea’s ratio is just 210.3% based on its nominal GDP (USD 1.93108 trillion), showing that share prices are significantly lower than Taiwan’s relative to the size of the economy.

One of the main reasons cited for Korea’s undervaluation compared to Taiwan is a relatively low shareholder return rate. Taiwan’s dividend payout ratio is 50.31% and its dividend yield is 1.71%, while KOSPI’s payout ratio is only 18.51% and its yield is 0.93%, less than half. Some also believe the cyclical nature of the memory semiconductor industry has led to undervalued share prices. However, with memory semiconductor contracts increasingly shifting toward long-term agreements (LTAs), business performance stability is improving.

Jihyun Kim, a researcher at Daol Investment & Securities, commented, “At present, Taiwan’s forward PER is more than twice that of KOSPI. If various variables ease in the second half of the year, the multiple could recover, creating an environment for an additional rally.”

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