A $1.7 trillion rally pushes Korea’s market cap above Germany’s

Core Insights - South Korea's stock market valuation reached $3.25 trillion, surpassing Germany's $3.22 trillion, making it the 10th-largest globally, driven by tech advancements and shareholder-friendly reforms [1][11] - The Kospi Index has increased by 23% in 2026, while Germany's DAX Index only rose by 1.7%, reflecting differing economic conditions and market dynamics [11] Market Dynamics - The rise of Korean stocks is attributed to its strategic position in key megatrends of the 2020s, including AI, electrification, and defense, contrasting with Germany's struggles in the auto and chemical sectors [1][11] - Korean President Lee Jae Myung's support for stock market reforms and corporate governance has contributed to the rally, alongside supply shortages in memory chips benefiting companies like Samsung Electronics and SK Hynix [11] Economic Comparison - Despite the stock market catch-up, South Korea's GDP in 2024 was $1.88 trillion, ranking 12th globally, while Germany's GDP was approximately $4.69 trillion, ranking 3rd, indicating a significant economic size disparity [4][11] - The structural divide between Korea's export-led corporate profits and weak domestic demand highlights the challenges faced by the broader economy, which relies more on consumption and construction [5][11] Sector Performance - The tech sector dominates the Kospi, accounting for about 40% of its weighting, which has been a key driver of its performance compared to Germany's DAX Index, which is more focused on industrial and defense companies [6][11] - Korean stocks are considered undervalued, with the Kospi trading at 10.6 times forward earnings estimates compared to Germany's benchmark at 16.5 times [11]