Foreign investors are flocking back to the Korean market, lured by its cheap valuation, an improving earnings outlook and reduced geopolitical risks.

Overseas investors have bought a net Won750bn of Korean shares this year, pushing the Kospi index about 6 per cent higher from its recent low of 1,355. That is a reversal from the past two years when foreign investors were massively short of Korea, chasing higher-growth emerging markets such as China and India.