Key insights
- Goldman Sachs has reduced its 12-month target for the Kospi Index by 25% to 9,000, citing concerns over AI investments and conservative equity valuations. Despite the downgrade, the bank believes Korean equities are significantly undervalued, implying over 60% upside from current levels. The selloff has disproportionately affected South Korea due to its heavy reliance on semiconductor manufacturers like Samsung Electronics and SK Hynix, which are central to AI infrastructure.
Investing.com -- Goldman Sachs has cut its 12-month target for South Korea’s Kospi Index by 25%, citing mounting concerns over artificial intelligence investments and more conservative equity valuations.
Strategists led by Timothy Moe lowered their target to 9,000 from 12,000 after the benchmark plunged more than 35% from its June peak.
Despite the downgrade, the revised forecast still implies upside of more than 60% from current levels, reflecting the bank’s view that Korean equities have become significantly undervalued.
The investment bank had previously raised its Kospi target in June and maintained its bullish outlook even as global technology stocks began retreating amid concerns about AI spending.
South Korea’s market has been particularly vulnerable because of its heavy exposure to semiconductor manufacturers Samsung Electronics (KRX:005930) and SK Hynix (KRX:000660).
Both companies have benefited from demand for memory chips used in AI infrastructure, making the Kospi a major indicator of investor sentiment toward the technology.
However, concerns about rising financing costs, massive infrastructure investments and uncertain returns have triggered widespread selling across Korean equities.
Goldman’s strategists said the market was pricing in an excessively pessimistic outlook for corporate fundamentals.
The Kospi’s 12-month forward price-to-earnings ratio has fallen to approximately four, a level not seen across 18 major markets since 2006.
Korean stocks now trade at roughly half the valuation of Indonesian equities, highlighting the scale of the recent selloff.
According to the bank’s estimates, current semiconductor valuations imply a 65% decline in sector earnings in 2027, a scenario the strategists consider overly pessimistic.
Meanwhile, companies outside the memory chip sector, representing approximately half the Kospi, trade at 7.6 times forward earnings.
Despite lowering its overall market target, Goldman continues to favour opportunities in power, industrials, corporate governance-related stocks, and companies benefiting from domestic economic recovery and Korean popular culture.
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