Investing.com — Analysts at Goldman Sachs believe the Korean stock market index (KOSPI) looks set to continue to outperform U.S. equity market indices, even as Korea recently announced its policy for Reshoring Investment Accounts, providing a reduction or exemption of capital gains tax on overseas stocks.
This led to the total number of accounts rising to 160,000 with total RIA balances worth $706 million. Parallelly as retail investors’ flows were reshored back to Korea, there was a weakening in retail investor flows into the U.S. since February, said the firm.
After rising by +76% in 2025 the KOSPI has grown by +50% YTD, vastly outperforming the SPX, up 4.47%YTD. The typical U.S. index returns are in the ~10-20% range.
The KOSPI attained an all-time high of a 4.6% week-on-week gain driven by a better-than-expected Q1 GDP and growing market breadth. Even as the Pharmaceutical, Insurance and Securities sectors underperformed the most, there was outperformance in the Shipbuilding, Machinery and Tech sectors this past week.
Outflows from KOSPI Tech and Auto drove foreign investors’ sale of the KOSPI market.
Notably, retail investors still own more than $177 billion in the US equity market. Furthermore, 2026 YTD retail investor inflows into ETFs tracking the domestic Korean equity market have been greater than those tracking foreign equity markets.
Strong retail inflows into domestic equities, policy-driven capital repatriation, and the shift away from U.S. ETF exposure to Korean ETFs together bolster the thesis that the KOSPI will likely outperform U.S. equity market indices.
Earlier this month, JPMorgan observed that the Korean stock market was the hottest in the world before the disruption caused by the Iran conflict. Now, the recovery appears to be complete and the KOSPI Composite is on its way to another run towards the record.
The AI demand driven semiconductor supercycle, earnings upgrades, and strong foreign inflows into Korean tech companies have together created a growth trajectory that can produce relative returns higher than those created by the U.S. equities market.
Driven by memory chips and the defence sector, this growth reinforces the KOSPI’s high beta, high upside profile compared to that of the U.S. equities market.
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