South Korean equities have swung from historic highs to severe turbulence, testing the country's market revival efforts. After the Kospi index delivered the world's strongest returns last year and surged 44% in 2025 before Middle East conflict, it suffered its worst-ever one-day drop. The index has since recovered 10% from its low but remains volatile.

President Lee Jae Myung's reforms aimed at ending the so-called Korea discount have shown promise. New legislation requires directors to consider all shareholders' interests, while treasury share cancellation rules prevent owner families from maintaining control through buybacks. These measures helped trigger a re-rating of South Korean stocks, though the rally was largely driven by tech giants.

Samsung Electronics and SK Hynix, which account for 40% of the Kospi's market capitalisation, have fueled much of the growth through profits from the global data centre boom. However, the recent volatility highlights ongoing challenges. With imports covering 98% of fossil fuel needs, energy security remains critical. Analysts suggest lowering inheritance tax rates and improving financial market access could help attract institutional investors and potentially secure MSCI developed market status.