South Korea has just achieved a historic double milestone — the nation’s stock index, KOSPI, has surged past the 7,000 level for the first time in history, while its total stock market capitalization has overtaken Canada to become the world’s seventh-largest equity market.

In a dramatic reshuffling of global rankings, data compiled by Bloomberg showed that the market capitalization of South Korea-listed companies has soared 71% this year to $4.59 trillion, eclipsing Canada’s 7% rise to $4.5 trillion. This milestone comes shortly after another landmark achievement, when the South Korean stock market overtook the United Kingdom to claim the world’s eighth-largest equity market ranking at the end of last month.

Against this backdrop, the global spotlight is naturally on South Korean stocks and, by extension, exchange-traded funds (ETFs) holding them, as investors would eagerly like to capture the explosive growth of the peninsula’s corporate giants.

Before turning to those ETFs, an important question for investors is what has powered this sharp rise and whether it is sustainable over the long term. The following discussion addresses these factors to help investors make a judicious decision.

Catalysts Behind KOSPI’s latest Surge

The primary driver behind South Korea’s leapfrog over Canada and the KOSPI’s climb above 7,000 is undoubtedly the nation’s dominance in artificial intelligence (AI) chip production, supported by insatiable global demand for AI semiconductors.

Unlike the diversified, resource- and financial-heavy composition of Canada’s market, South Korea’s benchmark index is heavily concentrated in two chipmaking giants, Samsung Electronics and SK Hynix, both of which have been on an upward trajectory lately.

Together, these two firms now account for approximately 45% of the benchmark’s weighting. 

In particular, Samsung Electronics shares have risen sharply recently after the company crossed the $1 trillion valuation mark, which in turn pushed the KOSPI above the 7,000 level. The company’s meteoric rise this year has been driven by strong demand for high-bandwidth memory (HBM) chips used in AI accelerators such as NVIDIA’s GPUs.

On the other hand, SK Hynix shares rallied 13% in a single trading session on May 4, 2026, after several major U.S. technology companies raised their investment plans for AI data centers last week. Consequently, gains in the share prices of these two AI leaders automatically lifted the entire index and overall market capitalization.

South Korea’s inclusion in the FTSE World Government Bond Index (“WGBI”), scheduled to begin in April 2026, appears to have also strengthened investor confidence in the country’s equity market. The move signals that South Korea’s financial infrastructure now matches the standards of the world’s leading economies.

What Lies Ahead for Seoul?

The near-to-medium-term outlook for South Korea’s stock market remains bullish, though not without risks.

With global tech giants continuing to ramp up capital expenditure on AI infrastructure, demand for Samsung and SK Hynix’s advanced chips is projected to stay robust through 2027. This should provide a continued tailwind for the KOSPI and, by extension, South Korea ETFs.

However, any sign of a slowdown in AI demand, tighter export controls on chips to key markets, or a correction in global technology sentiment could lead to amplified volatility. Also, fluctuations in the South Korean won against the U.S. dollar could affect foreign investor returns.

Nevertheless, the speed of this rally is striking. Most analysts had expected the KOSPI to consolidate above 7,000 only by the end of 2026.

Yet, the index has already surpassed that mark in May, reflecting the rapid pace at which the nation's stock market is progressing. Unless there is a sudden change in global AI-driven tech industry growth patterns, ETFs holding South Korean stocks should continue their strong momentum, at least in the near term.

South Korean ETFs Under Spotlight

Given the recent 7000 milestone achieved by the KOSPI and the favorable outlook, here are three South Korean ETFs that come under the spotlight, offering varying degrees of exposure to the KOSPI’s historic rally:

iShares MSCI South Korea ETF (EWY Quick QuoteEWY - Free Report)

This fund, with net assets worth $23.67 billion, offers exposure to 81 large and mid-sized companies in South Korea. SK Hynix holds the first position in this fund with 24.25% weightage, while Samsung Electronics holds the second position with 22.38% weightage. 

EWY has soared 87.2% year to date. The fund charges 59 basis points (bps) as fees and traded at a good volume of 21.06 million shares in the last trading session.

Franklin FTSE South Korea ETF (FLKR Quick QuoteFLKR - Free Report)  

This fund, with net assets worth $898 million, offers exposure to 157 large and mid-sized companies in South Korea. SK Hynix holds the first position in this fund with 24.74% weightage, while Samsung Electronics holds the second position with 17.58% weightage. 

FLKR has soared 84.2% year to date. The fund charges 9 bps as fees and traded at a volume of 0.56 million shares in the last trading session.  

Matthews Korea Active ETF (MKOR Quick QuoteMKOR - Free Report)  

This fund, with net assets worth $140 million, seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in South Korea. Samsung Electronics holds the first position in this fund with 25.8% weightage, while SK Hynix holds the third position with 5% weightage. 

MKOR has rallied 83.7% year to date. The fund charges 79 bps as fees and traded at a volume of 0.04 million shares in the last trading session.