The Kospi rally is making headlines in South Korea’s financial world. The benchmark index jumped 27 percent in the first half of 2025. Investors welcomed new leadership and market-friendly policies, fueling the market’s best start in over two decades.
According to Korea Exchange data, the Kospi rose from 2,399.49 in January to 3,055.94 by Friday. This 27 percent surge easily outpaced last year’s modest 5.4 percent gain. If it holds, it would be the strongest first-half growth since 1999’s 57 percent leap during the dot-com boom.
Previously, large Kospi rallies occurred in the 1980s. For example, it gained 51 percent in 1987 and 49 percent in 1986. In 2009, the index jumped 23.6 percent during a recovery from the global financial crisis. Now, with one trading day left in June, the Kospi seems poised for its best six-month stretch since 1999.
The current Kospi rally has been especially intense in June. The index gained 13.2 percent this month alone. Investors responded positively to President Lee Jae Myung’s economic pledges, including pushing the Kospi to 5,000 points.
Despite the surge, experts caution that the market may be overheating. Warnings from the Korea Exchange are rising quickly. As of Thursday, 10 stocks were labeled “investment risk,” compared to six last year. “Investment alert” flags jumped 55 percent, while “investment caution” notices rose 27 percent.
June brought more signs of a heated market. Thirty stocks received “short-term overheated” warnings — nearly triple the number in March. Analysts say the rapid growth could trigger corrections if investors begin taking profits. External pressures also loom. The U.S. granted South Korea a temporary tariff reprieve that expires July 9. New trade disputes could weaken market sentiment if no deal is reached.
“The Kospi is in overbought territory,” said KB Securities’ Lee Eun-taek. “Tariff issues and slower growth might cause pullbacks.”
Still, analysts remain cautiously optimistic. Some sectors, like semiconductors and retail, could benefit from capital rotation. Daishin Securities predicts temporary dips but expects the rally to continue overall. Shinhan Securities strategist Noh Dong-kil sees further upside. He forecasts the Kospi could reach 3,400 by year-end. However, he emphasized that strong earnings will be crucial to support the rally.
“Earnings will drive the next phase,” Noh explained. “Only fundamentally strong companies can maintain upward momentum.” As the Kospi rally continues, investors must balance optimism with caution. Short-term risks remain, but long-term opportunities still exist for selective sectors.
