Goldman Sachs Cuts Kospi Target but Expects Over 60% Upside

Goldman Sachs cut its 12-month target for South Korea's benchmark Kospi index by 25% from 12,000 points to 9,000 points. While this move ends one of the most optimistic institutional targets in the market, it leaves room for a strong recovery for the index, which has lost more than 35% since its June peak. According to the investment bank's projections, the index has the potential to gain more than 60% from its current trough levels.

Why did the Kospi index drop sharply?

The selloff accelerating in the South Korean market since June stems from global doubts over artificial intelligence infrastructure investments. The financing costs and profitability returns of massive hardware spending in the tech sector have unsettled investors. Memory chip makers with heavy weightings in the Kospi index, such as Samsung Electronics and SK Hynix, became direct targets of this global volatility. The sharp price retreat that began in the 2 major manufacturers leading the AI wave quickly spread across the Seoul bourse.

The pullback of more than 35% from the peak in June indicates that an overly pessimistic scenario is being priced in relative to corporate fundamentals. Current multiples in the semiconductor space are based on the assumption that chipmakers will experience a sharp 65% contraction in profits in 2027. This steep decline expected by the market carries a negativity far beyond what fundamental indicators suggest.

Will South Korean stocks rise?

Valuation ratios point to historic lows in the South Korean stock market. The 12-month forward price-to-earnings ratio of the Kospi index dropped to 4. This figure stands out as the lowest level seen across 18 major markets since 2006. Looking at current multiples, South Korean equities trade at roughly half the multiple of the Indonesian market. These deeply depressed multiples technically support an upside of more than 60% in the market.

The window of opportunity is not limited to tech stocks alone. Non-chip companies, which make up about half of the index, change hands at forward price-to-earnings multiples below 8 times. Market trends point to a portfolio shift from memory chipmakers toward utilities, industrials, and companies distinguished by corporate governance reform. Companies supported by the global reach of Korean popular culture and domestic economic recovery are also included in this group. Foreign capital inflows will be the decisive force in a potential recovery. Meanwhile, shares of Goldman Sachs, whose market capitalization stands at $258 billion, dropped 1.75% in the latest session.

This content is for information purposes only and does not constitute investment advice.