SEOUL — South Korea's Kospi index has risen 85% since Jan. 1, climbing past 8,000 and trading at 7,815 at the time of reporting, as foreign investor flows into artificial intelligence-related shares accelerated ahead of the Bank of Korea's monetary policy meeting scheduled for May 28, 2026. Over the past twelve months, the benchmark has risen 200%, with SK Hynix shares up 873% and Samsung Electronics shares up 447%.

The rally has unfolded as the South Korean won slumped 4.5% this year and drifted steadily lower since mid-2025, reaching levels near those last seen during the 2009 global financial crisis. The Kospi reached record-high levels despite U.S. tariffs and the ongoing Israel-Iran conflict.

President Lee Jae-Myung, who took office in June 2025, had pledged before taking office to raise the Kospi to 5,000, implying a doubling of the index over a five-year term. The index passed 8,000 within one year of his inauguration.

"The weakness in the won is an important data point as Korea doesn't have any fiscal problems," economist Brad Setser said. "It also doesn't suffer from any shortage of foreign exchange – so creative policy makers should be able to engineer a stronger won."

Setser recommended that Korea's National Pension System pause its accumulation of foreign assets, a step that would involve selling dollars for won. He also recommended that the United States join the Bank of Korea in directly supporting the won.

Foreign investor activity has shifted in recent weeks. "Foreigners became huge sellers of domestic assets in recent weeks," said Paul Cavey, an economist and founder of advisory East Asia Econ. Net sales of Kospi shares by overseas investors this year have exceeded US$62 billion.

The Korea discount has kept local equities priced below global peers. Lawmakers reinstated short-selling in March 2025 after a 17-month ban, and authorities expanded foreign-exchange trading to 17 hours. Korea's weighting in the MSCI Emerging Markets Index increased to 21.7% from 15.4%, compared with China's 22%.

The Bank of Korea has held interest rates steady since May 2025, with its benchmark rate at 2.5%. In the seven months before May 2025, it cut rates four times by 25 basis points each. The last increase was in January 2023, when the policy rate was raised to 3.5%, its highest level since 2008. Consumer prices rose 2.6% in April from a year earlier, after a 2.2% rise in March. In March 2026, South Korea imposed nationwide fuel-price caps for the first time in nearly three decades.