Citigroup raised its KOSPI target to 8,500 as Korea's benchmark index closed at a fresh record high around the 7,490 level. The upgrade reflects growing prospects for earnings upgrades centered on memory chips, along with policy effects, the bank said.
In a report released Tuesday, Citigroup lifted its KOSPI target to 8,500, more than 20% above the 7,000 level it had set in February. The KOSPI broke through the 7,500 mark for the first time during intraday trading that day, well above Citi's previous forecast of 7,000.
"We apply 2.1 times book value per share (BPS) to our KOSPI target forecast," Citi analyst Peter Lee said in the report. "A strong semiconductor cycle is overcoming oil prices." He added that the target "reflects the potential for upward revisions in memory chip earnings, the government's strong fiscal stimulus measures, and the government's corporate value-up policy push."
Lee picked Samsung Electronics (005930.KS), Eugene Technology (084370.KQ) and Doosan (000150.KS) as top picks in the semiconductor and hardware sectors, and AmorePacific (090430.KS) and APR (278470.KS) in consumer goods. Pharma Research (214450.KQ) was chosen as the top pick in medical aesthetics. Hyosung Heavy Industries (298040.KS), NCsoft (036570.KS), Krafton (259960.KS) and Kangwon Land (035250.KS) were also selected as top picks in their respective sectors.
On the Korean economy, Citi said, "Despite rising energy prices, the current account surplus is likely to remain at historically high levels, supported by robust semiconductor exports." The bank added, "The Korean economy is expected to maintain solid growth, driven by strong semiconductor exports, trickle-down effects into domestic demand, timely fiscal stimulus, and a more resilient-than-expected crude oil supply."
