By: CC Sun Congying, Park Jin-taek

Edited by: CC Sun Congying

On June 26, 2026, the South Korean Composite Stock Price Index (KOSPI) plunged over 8% intra-day, triggering the fifth trading halt of the year and a 20-minute suspension.

Just three days prior, the index had suffered a sharp 9.99% correction; mere trading days earlier, it had hit an all-time high of 9,114 points.

Launched in 1983 with a base value of 100 points, the KOSPI serves as South Korea's core benchmark index, comparable to China's SSE Composite Index for A-shares.

This extreme and erratic market trend stands out: from a bull market peak of around 3,300 points in 2021, the index hovered near 2,500 points by late 2024. After Lee Jae-myung took office in 2025, the index surged. On June 18, 2026, it breached 9,000 points for the first time, peaking at 9,114 points—a cumulative gain exceeding 200% from late 2024 levels.

Over the past five months, South Korea's total stock market cap nearly doubled. The intense volatility led to frequent trading halts, with 33 circuit breakers triggered in six months—roughly once per week.

The root cause of this chaotic alternation between rallies and crashes lies in a distorted market structure: Samsung Electronics and SK Hynix, two blue-chip stocks, dominate the market's direction. Within a year, their combined market cap in the KOSPI soared from 22% to 57%.

Calculations by the Korea Exchange reveal that excluding these two stocks, the true decline during the 9.99% crash on June 23 would have been less than 1.5%. Every move by these giants ripples across the entire South Korean stock market, and this imbalance extends far beyond capital markets.

Chaebols Infiltrate Daily Life: The Stock Market as a Microcosm of Society

The index's dependence on two chipmakers reflects a broader issue: South Korea's chaebol-dominated social ecosystem.

Capital market concentration in South Korea is extreme: Samsung and SK Groups together account for 66% of total market cap. Adding Hyundai Motor, LG, and HD Hyundai, the top five chaebols control 70%. Among them, Samsung Electronics and SK Hynix are the core, with their performance largely dictating the KOSPI's trajectory.

This structure is the result of decades of economic development. The top ten chaebols—Samsung, Hyundai, SK, LG, and others—dominate the national economy, with their influence permeating every aspect of daily life. The South Korean saying, "Death, taxes, and Samsung," underscores their ubiquitous presence, making it impossible for ordinary people to disengage.

An average South Korean's day revolves around chaebols: woken by a Samsung phone alarm, they encounter Samsung Life advertisements in elevators, see Samsung C&T logos on apartment mailboxes, and use Samsung credit cards for transit. Office computers and conference room displays are Samsung-branded, with daily expenses processed via Samsung Pay. Convenience stores stock Samsung refrigerators and air purifiers, and medical check-ups are done at Samsung Medical Centers. Even elders' pensions, children's learning tablets, and retirement communities often belong to the Samsung ecosystem.

Other chaebols like Hyundai, SK, and LG follow similar logic, differing only in business scope. For ordinary citizens, six or seven out of ten daily activities involve chaebols, leaving little room for choice.

The chaebol system also creates distinct social strata. Gaining employment at a chaebol subsidiary becomes a critical divide in education, career, marriage, and wealth accumulation for South Koreans.

Those with elite university and chaebol affiliations enjoy smoother life paths; others struggle. Meanwhile, chaebol employees accumulate wealth far faster than the general population.

As SK Hynix's stock price surged over 400%, its employees gained significant leverage in Seoul's Gangnam and Apgujeong matchmaking markets. Beyond substantial salaries, restricted stock units (RSUs) issued by the company appreciated sharply with market cap growth, providing tangible wealth boosts.

Many families leveraged this rally to improve their lives: a couple working at Samsung Electronics, previously unable to afford soaring rental deposits three years ago, saw their semiconductor stock holdings grow from 200 million won to 440 million won after going all-in on the sector. They now plan to buy property.

Data from South Korea's Ministry of Land shows that from January to April 2026, investors liquidated 3.73 trillion won in stocks and bonds to fund home purchases, with 60% flowing into Seoul and over 1 trillion won targeting Gangnam's three premium districts. The share of buyers using financial assets to purchase luxury homes priced above 1.5 billion won surged from under 5% in the past six years to 13.2% in April 2026. South Korean media bluntly stated: "Stock market gains are flowing into Gangnam's luxury housing market."

The phenomenon of two stocks propping up the entire market and chaebols permeating daily life stems from the same underlying logic. President Lee Jae-myung, born into the working class, is determined to dismantle this imbalance. His chosen reform battleground: South Korea's troubled stock market.

For years, South Korean stocks have suffered a significant "Korea Discount": even with similar profitability, listed companies trade at 20–30% below their U.S. and European peers. Overseas investors fear chaebol-dominated corporate governance, worried about unequal protection of their rights.

To address this, Lee launched a series of reforms to eliminate market discounts and reshape trading rules. "Ending the Korea Discount" became the core driver of the KOSPI's rally from 2,500 to 9,000 points between 2025 and 2026.

Live-Streamed Entry: President Becomes Bull Market Mascot with 155% Paper Profit

On May 28, 2025, in a Seoul Gangnam studio, then-presidential candidate Lee Jae-myung live-streamed his securities account operations, investing 41 million won (about $30,000) in three purchases. All targets were broad-based ETFs: KODEX 200 tracking the KOSPI 200, KODEX KOSDAQ 150 covering the tech-heavy KOSDAQ, and TIGER 200 with monthly contributions.

The live stream, titled "14 Million Ants on One Boat," referenced South Korean retail investors' self-nickname ("ants"). With 14 million stock accounts nationwide—meaning one investor for every 3.6 South Koreans—the event carried symbolic weight.

Two days before early voting for the presidential election, Lee declared: "Some once believed staying away from South Korean stocks was wise. Now, we will make returning to Korean stocks the smart choice."

On December 3, 2025, South Korean President Lee Jae-myung held a foreign media briefing. (Source: Xinhua News Agency)

He pledged to invest 1 million won monthly in TIGER 200 throughout his five-year term, totaling 100 million won. Crucially, he vowed to stick to broad-based ETFs and avoid chaebol stocks like Samsung Electronics to preempt accusations of "policy favoritism toward conglomerates."

This strategy was deliberate: direct investment in leading stocks could yield higher returns but risk accusations of supporting chaebols. By betting on broad-based ETFs, Lee aligned with his core goal of driving institutional reform and market ecosystem improvements.

Lee had previously dabbled in day trading as a young man, ending with losses. That experience revealed to him the fundamental flaws of South Korea's stock market: chaebols maintain control through cross-shareholdings, subsidiary spin-offs, and treasury stock maneuvers, allowing them to dominate firms with single-digit public ownership while denying retail investors a fair share of growth.

Lee's reform package included: amending the Commercial Code to mandate directors' fiduciary duty to all shareholders; requiring treasury stocks to be retired within 18 months; mandating a 50% dividend payout ratio for companies with market caps exceeding 10 trillion won, with board compensation halved for non-compliance.

Bolstered by these policies, the South Korean stock market rallied. By June 2026, when the KOSPI surpassed 9,000 points, Lee's initial 41 million won stake had surged 155% in paper profits. The South Korean president became the bull market's most prominent "living advertisement."

Hidden Control: How 1.44% Ownership Governs Samsung

The reform's focal point—treasury stocks—is a critical tool for chaebols to maintain absolute control. Treasury stocks are shares repurchased by listed companies using their own funds and held on their books. These shares do not pay dividends or count toward earnings per share (EPS), and South Korea's old Commercial Code left their voting rights ambiguous—a loophole chaebols exploited to create a "visible ownership + hidden control" dynamic.

Public data shows Lee Jae-yong's lineage directly holds only about 1.44% of Samsung Electronics, with similar low ownership by Lee Kun-hee's heirs. On paper, the Lee family resembles ordinary retail or institutional investors. Yet, through two covert structures, they retain decisive corporate influence.

The first is a pyramid-style cross-shareholding network. Samsung C&T, Samsung Life, and Samsung Electronics—three independent listed companies—are deeply intertwined. By controlling Samsung C&T at the apex, the Lee family governs the entire conglomerate. A Xiamen University study comparing governance at South Korean and Chinese family firms found that the top 30 South Korean chaebol families average just 4% visible ownership but wield 60% control through such structures. (Extended reading: Samsung's China Retreat: Who Silenced Market Alerts to Headquarters?)

The second structure involves treasury stocks. Samsung Electronics' massive profits allow the Lee family-controlled board to frequently repurchase shares, converting circulating stocks into treasury shares. In practice, voting rights for these shares rest entirely with the controlling shareholder. Profits generated by all shareholders thus become leverage for chaebol decision-making.

These two structures synergize to grant the Lee family majority voting rights in Samsung Electronics with just 1.44% public ownership. At shareholder meetings, treasury stock votes belong exclusively to the family; during dividend distributions, their low ownership limits gains, incentivizing them to suppress payouts and boost share buybacks. This maneuver raises stock prices—benefiting family holdings—while reducing profit outflows to retail investors.

High inheritance taxes further entrench this model. South Korea's top inheritance tax rate is 50%. After Lee Kun-hee's death in 2020, his family faced 12 trillion won in taxes over five years. To raise funds, they sold shares in Samsung SDS and Samsung Electronics, even reportedly offloading ancestral homes and overseas art. If the family held nearly half of circulating shares, the purchase costs and intergenerational taxes would become unbearable.

The current model, however, keeps corporate valuations low through minimal dividends, reducing the tax base and saving billions in taxes—costs ultimately borne by retail investors. Using small visible stakes to leverage absolute control, exploiting rules to suppress valuations, and offsetting high tax costs—this sequence lies at the heart of the "Korea Discount" and Lee's reform targets. (Extended reading: Exclusive: Opposition Leader Lee Jae-myung Scales Parliament Walls as Korean Assets Plummet)

Contrasting with China's A-share rules highlights fundamental differences. After China's 2018 Company Law revision, treasury stocks face triple constraints: a 10% ownership cap, a three-year holding limit, and no voting rights or dividend eligibility.

Chinese A-share companies repurchasing shares typically retire them to boost equity per share, benefiting all shareholders. Domestic private listed firms usually have 20–50% visible ownership by controlling shareholders, resulting in milder equity leverage. (Extended reading: Haier Smart Home Retires A-Share Treasury Stocks, Boosting EPS)

The key reason: China lacks a 50% inheritance tax bracket, so controlling shareholders need not hide ownership through complex structures.

Lee's treasury stock reform aims to align South Korea's capital market rules with mature markets—but this is just the first step.

Targeting Treasury Stocks: Chaebol Reform Takes Critical Stride

This reform round targets chaebols' hidden control mechanisms with three hard-hitting measures: mandating treasury stock retirement within 18 months to eliminate hidden voting rights; amending the Commercial Code to hold boards accountable to all shareholders; and imposing a 50% minimum dividend payout for companies with market caps over 10 trillion won, with board compensation cuts for non-compliance.

On February 25, 2026, the treasury stock bill passed the National Assembly with 175–1 in favor. While past governments' chaebol reforms faltered, Lee chose a pragmatic approach: avoiding the tangled cross-shareholding pyramid among Samsung C&T, Samsung Life, and Samsung Electronics. Reforming that system would require sequential legal revisions, multiplying complexity. Treasury stock reform faced less resistance, gained broad parliamentary support, and laid a foundation for dismantling the "Korea Discount."

Post-implementation, the market fragmented into three camps:

● Foreign Investors: Proactively reduced overweight positions, core holdings unchanged",

● Two Market Leaders: Largely Unaffected, Industry Position Further Consolidated

Samsung and SK Hynix have stood firm amidst this round of transformation, with their combined market capitalization and profit shares reaching 57% and 58%, respectively. Treasury stock reforms cannot alter index compilation rules, nor can they stem the strong demand for High Bandwidth Memory (HBM) driven by the AI industry boom. Amid market expectations of a gradual correction of the 'Korea Discount,' the industry positions of these two giants have been further strengthened.

● Local Retail Investors: Nationwide Frenzy to Enter the Market, Blindly Buying at Highs

The stock trading enthusiasm of the South Korean public has been fully ignited in this market rally. As of the end of May 2026, the outstanding margin balance in the stock market reached KRW 38 trillion, up 32% from the end of 2024; the margin balance of the top ten brokerage firms hit KRW 36 trillion, marking a new near-20-year high. The investor demographic is highly distinctive: investors aged 50 and above account for 62.3% of the total, with the margin balance of those aged 60 and above surging from KRW 3 trillion to KRW 8.02 trillion within a year, a 2.7-fold increase; new account openings among minors surged nearly tenfold year-on-year, with many parents even opening securities accounts for infants.

Significant capital has shifted from the insurance market to the stock market. In the first quarter of this year, the surrender value of the three largest life insurance companies in South Korea reached KRW 4.9 trillion, a 16.3% year-on-year increase, as many elderly investors redeemed their pension annuities to invest in the stock market.

Behind the nationwide frenzy, risks have also concentrated. From June 8 to 26, the market experienced a sharp correction, with forced liquidations exceeding KRW 300 billion within two weeks. 65% of retail investors incurred losses, with 20% of accounts seeing their assets nearly halved. On the day the market plunge triggered a circuit breaker, retail investors net purchased USD 5.9 billion against the trend, a record high. Such behavior was not a rational bottom-fishing strategy but a typical case of blindly buying at highs. (Extended Reading: Lee Jae-myung's Approval Rating Drops to 51%, the Lowest Since Taking Office)

The high business climate of the AI industry, sufficient HBM orders, and significant earnings growth among leading companies are all objective facts. However, the hidden danger (potential risks) of the South Korean stock market's excessive reliance on two individual stocks and its highly concentrated market structure persist. Coupled with the demonstration effect (demonstration effect) of substantial profits from the president's stock holdings, which indirectly encouraged the public to follow suit, ordinary retail investors have been deeply entrenched in a high-risk market. (Extended Reading: AI Storage Cycle Booms: How to Find 'Alternatives' When Leading Stocks Are Unattainable?)

Lee Jae-myung, a lawyer by training, rose from the position of Gyeonggi Province Governor to the presidency while maintaining distance from the chaebol (conglomerate) interest circles, which gave him the courage to take on the treasury stock system. The 175:1 voting result marked South Korea's closest attempt at chaebol reform in three decades. (Extended Reading: Lee Jae-myung, Who Once Couldn't Afford School Uniforms, Brings a Uniform Factory on His Visit to China)

However, partial reforms do not equate to a complete overhaul of the system. These measures merely cleared out the chaebols' 'arsenal of control' in the form of treasury stocks, without touching the core pyramid structure of multi-layered cross-shareholdings. Overhauling this framework would require revising the Commercial Code on a case-by-case basis and would also impact a series of supporting rules, including insurance accounting, group taxation, and inheritance tax, making the reform exponentially more difficult. Lee Jae-myung himself has admitted that chaebol reform is a long-term battle that cannot be accomplished by a single administration.

Meanwhile, the complex geopolitical landscape in Northeast Asia has further constrained the space for reform. Lee Jae-myung pursues a pragmatic and balanced foreign policy, holding differences with the U.S. in the semiconductor sector while actively maintaining economic, trade, and cultural exchanges with neighboring countries. This balanced approach requires South Korea to ensure stock market stability, encourage moderate concessions from the chaebols, and stimulate domestic demand. However, external forces prefer a more controllable ruling team, while South Korea's domestic chaebol old guard remains a Inherent opponents (inherent opponent) on the reform path.

Amid the intertwining of internal and external resistance, the treasury stock reform has been implemented. However, the road to shaking the deeply entrenched foundations of chaebol families in South Korean society remains long. This profound transformation, which will shape South Korea's economic and social trajectory, continues to be closely watched by global markets.