South Korean shares started 2014 as analysts' darling, but after losing nearly 5 percent year-to-date, they are fast falling out of favor.
The dismal performance this year follows a 0.6 percent loss in 2013. By comparison, Japan's benchmark Nikkei 225 added 7.3 percent, breaching the 17,000 level for the first time since 2011, as the Bank of Japan shocked markets in late October by increasing its already massive asset-buying program. China's Shanghai Composite index brushed off an economic slowdown to pile on 53 percent this year, while India's S&P BSE Sensex index has rallied nearly 30 percent since the start of 2014, lifted by Prime Minister Narendra Modi's pledge to revive the economy.
One reason for South Korea's underperformance is the steep drop in earnings by domestic firms, which have been hurt by a weak Japanese yen making won-denominated exports less competitive and uncertainties in the global economy, analysts say.
"You have a combination of a relatively strong won and cost issues [hence] we're seeing automakers and the electronics sector consistently missed earnings throughout the year," Adrian Mowat, chief Asian and emerging market equity strategist at J.P. Morgan, told CNBC Asia's "Squawk Box" last week.
Samsung Electronics, which has the biggest weighting in the benchmark Kospi, has given up 4.9 percent this year as the tech giant appears set for its first annual earnings drop since 2011 amid cut-throat competition in the smartphone market. The next biggest stock on the index, Hyundai Motor, has tumbled 27 percent since the beginning of the year.
The government hasn't been complacent about the economic headwinds the country faces, with Finance Minister Choi Kyung-hwan rolling out a $40 billion stimulus package in July with expanded fiscal spending, corporate tax breaks and a relaxation of mortgage lending rules.
"The problem with government efforts is that it only helps certain sectors in the Kospi. It helps the banks in the medium term and some domestic retailers, but they tend to be mid-caps like Lotte Himart," said J.P. Morgan's Mowat.