The ongoing stock market rally is supposed to be a source of excitement for investors. But for an office worker in his 50s surnamed Kim, the recent surge in stocks has brought more frustration than joy.

The reason is very simple. He does not own shares in Samsung Electronics, SK hynix or other large-cap leaders that have powered the market in recent months. Instead, his portfolio is filled with small-cap stocks that have failed to participate in the bull market run.

A bigger problem is that he is still clinging on to his holdings, hoping that someday, their prices will rise. But unfortunately, we all know such rebound never comes. “I could buy the leading stocks even now because I have cash,” Kim said. “But I’m afraid I would be buying at the top. I’d rather wait for a correction, even though I know the rally may not end soon.”

He is one of hundreds of thousands of individual investors who have been sidelined by a “K-shaped” rally, in which a small group of dominant companies surge while the majority of stocks lag behind.

The benchmark KOSPI index has been on a record-breaking run, fueled by strong earnings in the semiconductor sector and sustained foreign investor inflows. Despite geopolitical risks, including tensions in the Middle East, the index has posted one of the strongest gains among major global markets this year.

KOSPI has climbed about 57 percent so far this year, following a 75.6 percent surge in 2025. The rally has pushed the combined market capitalization of companies listed on Korea’s three exchanges — the main KOSPI, the tech-heavy Kosdaq and the junior KONEX — above 6,100 trillion won ($4.13 trillion).

The rapid rise has also elevated Korea’s global standing. The country’s stock market has become the world’s eighth largest, surpassing the United Kingdom. The U.K. market was about twice the size of Korea’s as recently as 2024, but the gap has reversed in just less than two years.

But the problem is that while market indices are surging, not all stocks are rising. In fact, declining stocks have outnumbered advancing ones. The gains have been concentrated in a handful of sectors, particularly semiconductors, as well as shipbuilding, energy and defense — industries closely tied to exports and global demand.

Companies reliant on domestic consumption or on imported raw materials have struggled under the weight of high interest rates, rising energy costs and a weaker Korean won. This disparity has left many retail investors on the sidelines of the rally, holding stocks that have stagnated or declined.

This growing polarization in the stock market mirrors trends in the broader economy.

Korea’s gross domestic product (GDP) rose 1.7 percent in the first quarter of this year from the previous three months, marking the strongest quarterly expansion since the third quarter of 2020 when the economy expanded 2.2 percent, according to the Bank of Korea.

The higher-than-expected growth was realized mainly by a semiconductor export boom. Semiconductor manufacturing accounted for about 55 percent of total GDP growth in the first quarter, underscoring the disproportionate role of a single industry, the central bank said.

SK hynix posted an unprecedented operating profit of 37.61 trillion won for the first quarter, while Samsung Electronics reported a record-setting 57.2 trillion won in operating profit for the same period. Together, the two tech giants account for more than 40 percent of the KOSPI’s total market capitalization when the index comprises more than 800 listed companies.

Such concentration certainly raises concerns about the sustainability of the current rally.

Market analysts say this unbalanced stock market trend, driven by only a few leading shares, will likely continue in the coming months. As long as global demand for semiconductors remains strong and foreign capital continues to flow into large-cap stocks, the K-shaped pattern will persist.

For investors, this environment demands greater selectivity and discipline because their performance depends on picking the right sectors and companies. Kim’s case serves as a cautionary tale. Missing the leaders can mean missing the rally altogether.

So, investors should be more careful when choosing which stocks to buy, as the decision could determine their wealth for years to come.

Lee Hyo-sik is finance editor at The Korea Times.

© The Korea Times