Goldman Sachs has raised its 12-month target for Korea's benchmark KOSPI to 8,000 points, reflecting earnings improvement led by semiconductors and industrials. Nomura Securities earlier projected the KOSPI could climb to 8,000 points, driven by semiconductor profits.
In a report released Thursday, Goldman Sachs lifted its target from the previous 7,000 points to 8,000 points, forecasting that KOSPI earnings will grow 220% this year.
"Earnings improvement in the semiconductor sector is particularly notable, and even excluding semiconductors, the rest of the market is expected to post solid earnings growth of around 48%," said Timothy Moe, Asia-Pacific strategist at Goldman Sachs.
Valuations also leave room for further upside, according to the report. "Despite the recent rebound, the KOSPI's forward price-to-earnings (PER) ratio stands at about 7.5 times, still low compared to historical averages," Moe said. "Considering that the average PER at past market peaks was 10 times, there is room for additional upside."
He also assessed that downside risks are limited. "Even under a conservative scenario where earnings decline 33% and the PER falls to 11 times, the KOSPI floor is estimated at around 6,250," Moe said.
On the supply-demand front, the report emphasized that there is still room for foreign capital inflows. "Korea's weighting in global and emerging market funds remains underweight," he noted. "There is potential for future capital inflows."
Based on this analysis, Goldman Sachs maintained its "overweight" view on Korean equities. For investment strategies, the firm recommended preferred shares, holding companies trading at steep discounts to net asset value (NAV), low price-to-book ratio (PBR) firms expected to improve shareholder returns, and stocks with potential for re-rating through better capital allocation.
As the KOSPI again attempts to break through its previous high, global investment banks continue to raise their KOSPI outlooks. Nomura Securities had already set its first-half KOSPI target at 7,500 to 8,000 points in late February, before the U.S.-Iran conflict escalated. At the time, Nomura cited improving memory chip market conditions, a semiconductor super-cycle including high-bandwidth memory (HBM), and profit growth in artificial intelligence (AI) infrastructure and defense sectors as grounds for its outlook.
