Summary: Analysts at Goldman Sachs maintain that South Korea's stock market index, the KOSPI, is likely to keep outperforming U.S. equity market indices. Policy incentives for repatriating overseas investment, growing retail inflows into domestic ETFs, improving macro data and sector leadership in technology, shipbuilding and machinery are cited as the main drivers.
Goldman Sachs notes that South Korea's recently announced Reshoring Investment Accounts policy - which offers a reduction or exemption of capital gains tax on overseas stocks - has encouraged domestic investors to bring capital back into Korea. That policy has coincided with a rise to 160,000 RIA accounts, carrying combined balances of $706 million. The firm reports that as retail investor flows were redirected to the domestic market, retail flows into U.S. markets weakened beginning in February.
The KOSPI has delivered very strong returns recently, rising 76% in 2025 and posting a gain of 50% year-to-date. By comparison, the SPX has increased 4.47% year-to-date, while typical U.S. index returns are described in the range of about 10-20%.
Last week the KOSPI notched a 4.6% week-on-week advance, reaching an all-time high on the back of a stronger-than-expected first-quarter GDP print and a widening market breadth. Sector performance was mixed: Pharmaceutical, Insurance and Securities sectors were the weakest performers, while Shipbuilding, Machinery and Technology led gains over the period.
Despite overall strength, Goldman highlights that outflows from KOSPI Technology and Auto sectors contributed to foreign investors selling within the KOSPI market. Retail investors retain significant exposure to U.S. equities, holding more than $177 billion in U.S. stocks. Still, 2026 year-to-date retail inflows into ETFs tracking Korean domestic equities have exceeded inflows into ETFs focused on foreign equity markets.
Goldman frames three reinforcing forces behind the expectation of continued KOSPI outperformance: strong retail flows into domestic equities, policy-driven capital repatriation via the RIA framework, and a rotation away from U.S.-focused ETF exposure toward Korean ETFs. These dynamics, the firm says, support the view that the KOSPI will likely outperform U.S. equity market indices.
Market commentary earlier in the month from another major bank noted that Korea was the hottest market globally before a disruption tied to the Iran conflict. That bank now views the recovery as complete and sees the KOSPI Composite moving toward another run at its record.
Goldman also cites an AI demand-driven semiconductor cycle, earnings upgrades, and strong foreign inflows into Korean technology names as elements of a growth trajectory capable of producing relative returns above those of U.S. equities. Memory chips and the defense sector are identified as contributors to the KOSPI's higher beta and greater upside profile when compared with U.S. markets.
Overall, Goldman highlights a combination of policy, retail behavior and sector-specific drivers that together form the basis for a continued KOSPI outperformance thesis, while also noting pockets of foreign selling and uneven sector performance within the index.