South Korea’s stock market has been one of the world’s standout performers during the first half of 2026. While most headlines have focused on memory-chip giants Samsung Electronics (LON:SMSN) and SK Hynix, the reality is that a much broader group of companies has helped power the rally.
For UK investors looking for global diversification, the KOSPI illustrates an important lesson: major bull markets rarely rely on just one or two companies. Although AI infrastructure has been the catalyst, defence, industrial automation, power equipment, financials and biotechnology have also produced exceptional returns.
Semiconductor giants still dominate
Samsung Electronics and SK Hynix remain the centre of gravity for Korean equities.
Together they account for more than half of the KOSPI’s total market capitalisation, meaning even modest moves in either stock can have an outsized effect on the entire index. During periods of strong AI optimism, the two companies have contributed a disproportionate share of daily gains, while recent sharp pull-backs also demonstrated how dependent the market has become on semiconductor sentiment.
Even more remarkable has been SK Hynix’s rise.
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Driven by leadership in high-bandwidth memory (HBM) chips used in AI accelerators, the company overtook Samsung Electronics as South Korea’s largest listed company during June—an almost unimaginable outcome only a few years ago. Reuters notes SK Hynix controlled around 61% of the HBM market in 2025, making it one of the biggest beneficiaries of global AI infrastructure spending.
| Company | Why it matters |
| Samsung Electronics | World’s largest memory-chip manufacturer, smartphones, foundry and consumer electronics |
| SK Hynix | Global leader in AI memory (HBM), major supplier to Nvidia and other AI chipmakers |
But the rally has become much broader
Several lesser-known Korean companies have quietly generated extraordinary returns.
| Company | Sector | Why shares have rallied |
| Hanwha Aerospace | Defence | Strong global demand for Korean defence exports |
| Hyosung Heavy Industries | Grid equipment | AI-driven electricity infrastructure spending |
| LS Electric | Industrial automation | Smart factories, data centres and power equipment |
| Doosan Enerbility | Energy | Nuclear power and turbine demand |
| Samsung Biologics | Healthcare | Expanding global contract drug manufacturing |
| HD Hyundai Electric | Electrical equipment | Grid modernisation and AI-related electricity demand |
| Korea Aerospace Industries | Aerospace | Defence exports and aircraft programmes |
| POSCO Future M | Battery materials | Recovery in EV supply chain expectations |
Why these ‘unsung heroes’ matter
Rather than simply buying AI chips, investors have begun identifying every company that supplies the AI ecosystem.
That includes:
- Electrical transformers for data centres.
- Factory automation equipment.
- Defence manufacturers benefiting from geopolitical spending.
- Drug manufacturers with structural growth.
- Energy infrastructure companies helping satisfy AI’s huge electricity requirements.
This broadening participation is generally healthier than a rally led by only two semiconductor stocks.
KOSPI versus major markets (YTD 2026)
| Market | Approximate YTD performance |
| KOSPI | ~92% |
| S&P 500 | ~9% |
| Nasdaq Composite | ~13% |
| FTSE 100 | ~5% |
| Nikkei 225 | ~36% |
| Euro Stoxx 50 | ~8% |
Source: Google Finance
What analysts are saying
Analysts remain constructive on Korea’s structural AI story.
The bull case includes:
- Continued AI data-centre investment.
- Tight HBM memory supply.
- Expanding defence exports.
- Improving corporate governance.
- Rising foreign investor inflows.
However, analysts also warn the market has become increasingly concentrated and volatile.
Recent 8%-10% swings in the KOSPI demonstrated how quickly sentiment can reverse when investors question AI spending or semiconductor valuations. Reuters also notes Samsung and SK Hynix are embarking on enormous capital expenditure programmes that could create future oversupply if AI demand weakens.
Opportunities for UK investors
The KOSPI still offers attractions that differ from many developed markets:
- Global leadership in AI memory.
- World-class manufacturing.
- Exposure to defence exports.
- Growing electricity infrastructure businesses.
- Generally lower valuations than comparable US AI stocks.
Many Korean industrial companies also trade on earnings multiples well below equivalent US names despite comparable growth prospects.
Risks to remember
Investors should also recognise the risks:
- Heavy dependence on AI capital spending.
- Semiconductor pricing remains cyclical.
- High index concentration in a handful of companies.
- Geopolitical tensions involving North Korea and China.
- Currency movements between sterling and the Korean won.
- Greater volatility than most developed equity markets.
How UK investors can access the South Korea opportunity
Unlike Japan or India, there are very few UK-domiciled active funds dedicated solely to South Korea. Most UK investors gain exposure either through a dedicated Korea ETF or via broader Asian and emerging market funds where Samsung Electronics and SK Hynix are among the largest holdings.
1. Dedicated Korea ETFs (the simplest route)
For investors who want pure exposure to the KOSPI, a single-country ETF is usually the most efficient solution.
| Fund | Type | Why consider it? | Potential drawback |
| iShares MSCI Korea UCITS ETF | Passive ETF | Largest and most established Korea ETF available to UK investors | Highly concentrated in Samsung and SK Hynix |
| Franklin FTSE Korea UCITS ETF | Passive ETF | Lower-cost alternative tracking the Korean market | Similar concentration risk |
| HSBC MSCI Korea Capped UCITS ETF | Passive ETF | Caps the largest holdings slightly, offering marginally better diversification | Still dominated by technology stocks |
The concentration is striking. As of June 2026, Samsung Electronics represented around 30% of the Franklin FTSE Korea ETF, with SK Hynix accounting for another 27%. Together, the two companies made up well over half the portfolio, illustrating just how dependent Korean equity funds are on the AI memory-chip story.
2. Active funds with meaningful Korean exposure
Investors wanting broader diversification may prefer regional funds where South Korea is an important allocation rather than the whole portfolio.
| Fund | Typical Korea weighting | Why it could appeal |
| JPMorgan Emerging Markets Investment Trust | High single digits to low teens | Experienced active manager able to overweight Korea when valuations are attractive |
| Fidelity Asia Values | Significant | Focus on undervalued Asian companies, including Korean industrials and financials |
| Schroder Oriental Income Fund | Moderate | Income-focused Asian portfolio with exposure beyond technology |
| Pacific Assets Trust | Variable | Sustainable approach across Asia, including selected Korean holdings |
| JPMorgan Emerging Markets Fund | Moderate | Broad emerging market exposure with active country allocation |
These diversified funds are less reliant on Samsung Electronics and SK Hynix and can benefit if Korea’s recent rally broadens into banks, industrial automation, defence and healthcare.
Which approach is best?
| Investor objective | Most suitable vehicle |
| Maximum exposure to the AI-led Korea rally | Dedicated Korea ETF |
| Lower volatility | Asian equity investment trust |
| Long-term emerging markets allocation | Active emerging markets fund |
| Income | Asian income investment trust |
| Diversification away from the Magnificent Seven | Active Asia or emerging markets fund with meaningful Korea exposure |
Investor verdict
South Korea’s stock market has been one of the world’s standout performers during the first half of 2026. For UK retail investors, South Korea remains one of the most compelling international equity markets heading into the second half of 2026, yet individual stocks can be difficult to access even on leading UK platforms.
Samsung Electronics and SK Hynix will almost certainly continue to dictate short-term market direction, but the real story has become much broader. Companies supplying electricity infrastructure, defence equipment, industrial automation and biotechnology have emerged as the market’s ‘unsung heroes’, suggesting the Korean bull market is evolving from a narrow semiconductor trade into a wider industrial and AI-infrastructure expansion.
That broadening is encouraging—but after such spectacular gains, investors should also expect significantly higher volatility than in UK or US markets as valuations become more demanding and any disappointment in AI spending could trigger sharp corrections.
Following a near-doubling of the KOSPI in the first half of 2026, a dedicated Korea ETF remains the highest-conviction way to express a bullish view on Korean equities—but it is effectively a high-conviction investment in Samsung Electronics and SK Hynix because of their enormous index weights.
For many UK retail investors, a high-quality Asia-Pacific or emerging markets investment trust may prove a more balanced way to participate. These managers can selectively own Korea’s ‘unsung heroes’—such as defence, power equipment and industrial automation companies—while reducing exposure if semiconductor valuations become stretched. That flexibility could become increasingly valuable if the second half of 2026 brings the higher volatility that many strategists expect following such an exceptional rally.
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