Seoul's main stock index surged past 5,000 points for the first time in history on Thursday, a striking milestone achieved as South Korea navigates its deepest political crisis in decades.
The KOSPI (Korea Composite Stock Price Index) closed at 5,012.34, marking a 2.1 percent gain and shattering the psychological barrier that has eluded the market for years. The breakthrough comes barely a month after President Yoon Suk Yeol's impeachment over his short-lived martial law declaration plunged the nation into constitutional turmoil.
The disconnect between political chaos and market euphoria reflects a fundamental shift in how investors view South Korea's economic fundamentals. While the National Assembly debates impeachment proceedings and prosecutors investigate the former president, foreign and institutional investors have been pouring capital into Korean equities at record pace.
Analysts attribute the rally to several converging factors. South Korea's semiconductor sector—led by Samsung and SK Hynix—continues to benefit from the global AI boom, with memory chip prices stabilizing after a two-year downturn. The won's recent depreciation has also made Korean exports more competitive, particularly in key markets like China and Southeast Asia.
"Political risk is being priced as temporary, while the economic fundamentals remain solid," according to Chosun Ilbo's market analysis. "Investors are betting that whoever emerges from this crisis will maintain the export-focused policies that have driven growth."
The milestone is particularly notable given the timing. Just six months ago, the KOSPI languished below 4,500 as concerns about China's economic slowdown and rising U.S. interest rates weighed on sentiment. Thursday's close represents a gain of more than 11 percent since October.
Yet the rally masks deeper structural challenges. South Korea's economy contracted 0.3 percent in the fourth quarter of 2025, according to Bank of Korea data released the same day, marking the first quarterly contraction in six months. Consumer spending remains weak as households grapple with high debt levels and inflation that, while moderating, continues to erode purchasing power.
The political uncertainty also carries real economic costs. The caretaker government has limited capacity to implement major policy initiatives, and the timeline for new elections remains unclear. Foreign direct investment commitments have slowed as multinational corporations adopt a wait-and-see approach.
For retail investors, the 5,000 milestone evokes complex emotions. Many remember the last major peak before the 2008 financial crisis, when the KOSPI briefly touched similar levels before plunging. The Korean term "개미" (gaemi, literally "ants")—used to describe small retail investors—has become synonymous with both hope and vulnerability in a market often dominated by institutional players and foreign capital.
The semiconductor cycle remains the critical variable. If the AI boom sustains demand for high-bandwidth memory chips through 2026, South Korea's export engine could carry the economy through the political transition. But any slowdown in tech spending or escalation in U.S.-China trade tensions could quickly reverse gains.
Watch what they do, not what they say. In East Asian markets, political drama often proves transitory while economic fundamentals determine direction. The question now is whether the KOSPI's breakthrough represents genuine strength or a temporary decoupling from reality.
