South Korea鈥檚 stock market is now worth more than the UK鈥檚, which would have sounded unlikely not very long ago.
Bloomberg data, reported by The Korea Times and Business Korea, shows South Korea鈥檚 total stock market capitalisation has reached $4.04 trillion, putting it ahead of the UK at $3.99 trillion. This would therefore make South Korea the world鈥檚 eighth largest stock market right now.
The turnaround happened quickly because if you think about it, at the end of 2024, the UK stock market was about twice the size of South Korea鈥檚 market.
And now, in just over a year, that has changed completely…
South Korea鈥檚 combined market value came up 45% this year, according to Bloomberg data cited by The Korea Times. The UK market came up 3% over the same period.
That is a major turnaround for a market often seen as heavily dependent on a small group of giant technology companies.
A large reason comes down to semiconductors as Samsung Electronics and SK hynix, South Korea鈥檚 two biggest listed companies, now make up more than 40% of the KOSPI鈥檚 total market capitalisation. The KOSPI tracks more than 800 listed companies.
AI has pushed investors toward businesses connected to computing infrastructure, and South Korea happens to be home to two of the biggest names in memory chips.
Why Are Chipmakers Doing So Much Of The Work?
Investors have spent the last year pouring money into businesses connected to AI infrastructure.
This means software companies are getting interest, but so are the businesses producing the hardware needed to run AI systems. Memory chips, high bandwidth storage and data centre equipment are all seeing huge demand.
Samsung Electronics and SK hynix are in the middle of that trend.
Business Korea reported that last year the KOSPI posted the fastest gain among major global stock markets, and there is growing talk that South Korea could go higher in the rankings if this pace keeps going like this.
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The countries directly above South Korea are grouped fairly closely. India is valued at $4.97 trillion, Canada at $4.49 trillion and Taiwan at $4.48 trillion, according to Bloomberg data reported by Business Korea.
This means South Korea is now in a position where rankings can change quickly.
Lee Kyung-min, analyst at Daishin Securities, told The Korea Times, 鈥淭he benchmark could extend its record-setting run and move to higher levels on valuation normalization alone. A forward price-to-earnings ratio of 8 times would put KOSPI near 7,100, while 9 times would imply around 7,900.鈥�
That is an optimistic view, although there are still obvious risks. Business Korea said South Korea鈥檚 stock market is heavily dependent on semiconductors, which means weakness in that sector would quickly affect the wider market.
A securities industry official told the publication: 鈥淭he domestic stock market is continuing its upward trend even though the war between the United States and Israel and Iran has not completely ended. Momentum will continue only if it is supported by improving corporate earnings and better governance.鈥�
What Does This Mean For The UK?
This is another uncomfortable moment for the UK especially since London has spent years dealing with concerns around weaker local equity growth, fewer exciting listings and an increasing number of businesses choosing New York over London.
Sam Hields, Partner at OpenOcean, said, 鈥淭he news shouldn’t be surprising given the global demands for AI hardware. What is striking is the pace: Taiwan made the same leap earlier this month. Two countries have now overtaken the UK stock market in under four weeks, driven almost entirely by their chip manufacturing capabilities.鈥�
鈥淭he UK doesn鈥檛 have the same chip manufacturing industry as Korea or Taiwan, but it does have deep AI expertise and many innovative start-ups that should be a driving force for the UK economy. However, founders are being discouraged by a restrictive tax environment that disincentivises returns and forces our best and brightest to list in the US. We鈥檙e seeing an exodus of the talent and innovation that would enable the UK stock market to compete globally,鈥� he adds.
鈥淭he UK government needs to take greater action, setting out a coherent long-term policy that reduces operational costs and enables start-ups to effectively scale in the UK stock market. A 拢500 million sovereign AI fund cannot compete with the scale TSMC and Samsung are operating at, and scrapping the payments regulator is only a small step in the right direction.鈥�
South Korea overtaking the UK does not suddenly make London irrelevant, as the UK is still one of the world鈥檚 largest financial markets.
This moment says something important about where investor money is going right now. Markets connected to AI hardware, semiconductors and technology manufacturing are getting rewarded quickly.
