Many economists now say the rally will only last if the country strengthens institutions, encourages greater corporate innovation, and expands its economy beyond semiconductors.
Similar remarks were made by Kim Sei-wan, president of the Korea Capital Market Institute during a press briefing at the Korea Press Center in central Seoul on Wednesday.
Kim said the South Korean market has long remained undervalued, compared to global peers, despite strong players like Samsung Electronics and SK hynix.
He attributed much of the market's revaluation to regulatory reforms aimed at strengthening shareholder rights and improving board independence, implemented after President Lee Jae Myung took office in June last year.
He added that those reforms were likely the main driver behind the market's recent rally from roughly the 2,000-point range to around 6,000, before strong corporate earnings and market expectations provided further momentum.
"As far as I know, this is one of the fastest rises in stock market history," he said. "We joke that this rise should be registered in Guinness World Records."
In fact, the country's benchmark KOSPI has risen about 225.6 percent since June 2025, while the junior KOSDAQ has gained 41.8 percent, repeatedly setting record highs.
Kim said Korea had delivered the strongest stock market performance among major economies over the past year. He explained the rally was initially driven by institutional changes including stronger protection for minority shareholders and greater independence of corporate boards. But this year's gains have increasingly been supported by improving earnings at major companies, particularly in technology and artificial intelligence (AI)-related sectors such as semiconductors, defense, and biotechnology.
But Kim warned that the market still relies heavily on the two major chipmakers, which now account for more than half of the stock market's total value, up from about 40 percent last year.
Kim said South Korea should use the current boom to restructure its economy toward advanced manufacturing, AI, and other services, citing Japan, which once dominated the global memory chip market but lost ground after failing to make timely large-scale investment.
"South Korea's semiconductor competitiveness can weaken at any time," he said. "When we have the world's strongest competitiveness, we must use this opportunity to restructure our industries."
Kim said domestic individual and institutional investors have been the main buyers of South Korean stocks this year, while foreign institutional investors have been net sellers. He said this marked a reversal from last year, when foreign investors helped support the market.
Kim also said South Korea's possible inclusion in the MSCI developed market index would be a major event, as many global institutional investors use MSCI benchmarks to allocate their portfolios.
"It would be a very important milestone, as it could open another channel for foreign liquidity into the South Korean stock market," he said.
Asked about risks from retail investors borrowing money to buy stocks and investing in leveraged products, Kim said margin lending by securities firms is already tightly capped and monitored. But he warned that leveraged products can increase market volatility.
He said, "It is true that leveraged products carry the risk of increasing volatility," but added that financial authorities are closely watching the market.
Kim also cautioned against debt-fueled investing among younger investors. "Investment should be made with surplus funds, not with borrowed money," he said. "The government cannot stop people from making such investments if they are legal, but financial education is essential."
Kim said the next stage of South Korea's market reforms should focus on building trust. He pointed to stronger shareholder protection, better enforcement of rules, consistent policies, improved corporate governance, more innovation, and clearer communication with investors as key tasks.
"The government's role is very important in maintaining the momentum of the stock market boom," Kim stressed.
But he pointed out that market behavior is influenced by countless variables. "We always say everything affects stock prices," he said. "Corporate earnings matter, interest rates matter, the weather matters — even the number of birds flying in the sky."
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