[R&E] KOSPI Taking Aim at the 5,250 Mark, 'Valuation Level-Up' Led by AI and Defense Infrastructure

[R&E: Research & Epoch]
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Market Overview: Key Indicators and Trends

The New York stock market took a breather yesterday as earnings volatility in financial stocks intertwined with policy risks, though geopolitical tensions from the Middle East stimulated a preference for safe assets. On the other hand, the domestic stock market (KOSPI) recently closed at 4,723.10pt (+0.65%) amid a strong trend of renewing its all-time high, proving its solid fundamentals.

The current market's core lies in the 'expansion of valuation' beyond mere 'earnings.' Major research centers have proposed a 2026 KOSPI target of 5,250pt (upgraded), judging that the strong momentum of AI infrastructure and defense investment will pull up the multiple of the Korean stock market despite concerns over a global economic slowdown. Today's market is expected to undergo a process of digesting profit-taking sales due to the short-term earnings season, but this is interpreted as a healthy correction on the way to a structural bull market, and buying pressure centered on leading stocks such as semiconductors, power, and shipbuilding is expected to continue.

Key Industry Issues and Insights

The driving force leading the stock market's level-up in 2026 is the expansion of 'global government spending' that goes beyond corporate earnings growth. As the governments of major countries, including the United States, concentrate their finances on building AI infrastructure and increasing defense spending to defend their economies, Korea's closely related capital goods sector has emerged as the biggest beneficiary.

The explosion in power demand for AI data centers is leading to an earnings surprise for power equipment companies such as Hyosung Heavy Industries, and this signifies an entry into a structural super cycle rather than just simple good earnings. In addition, the semiconductor sector continues its qualitative growth centered on HBM and high value-added substrates (FC-BGA). Daeduck Electronics is expected to see its operating profit surge by 221% year-on-year in 2026, standing at the forefront of the industry turnaround.

The shipbuilding and defense sectors are also intertwined with the trend of 'increased defense spending'. HD Korea Shipbuilding & Offshore Engineering significantly raised its order target (+62.4%) in connection with the US Navy's vessel strategy, and the Hanwha Group is resolving its holding company discount by combining active shareholder returns (cancellation of treasury shares) and defense order momentum.

Market Signals

• KOSPI Target Upgraded: Based on valuation expansion driven by AI and defense infrastructure investment, the upper end of the KOSPI band for 2026 has been proposed at 5,250pt, up 9.4% from the previous estimate.

• Memory Price Surge: As a supplier-dominated market formed, the spot price of DRAM (DDR4 8Gb) surged 55.56% over the past month, signaling a strong recovery in the semiconductor industry.

• Holding Company Shareholder Returns: Hanwha decided on a spin-off and the cancellation of its entire 5.9% treasury shares, causing its stock price to soar, which is interpreted as a signal for resolving the Korea discount.

Epoch View: Investment Implications

Now, rather than focusing on simple fluctuations in the index, attention should be paid to the fact that the 'logic of the rise' has changed. In a situation where earnings growth is already reflected in stock prices, additional upside will come from beneficiaries of 'expansionary fiscal policy', namely AI infrastructure and defense.

Therefore, adjustments due to the short-term earnings season should be utilized as an opportunity to expand the weighting of leading stocks. Maintain a solid portfolio in the semiconductor (HBM/substrate), power equipment, and shipbuilding sectors that align with the direction of government spending. In particular, a selective approach to performance-driven stocks proven by numbers like Hyosung Heavy Industries and Daeduck Electronics, and holding companies with a clear will for shareholder returns like Hanwha, will determine the rate of return in 2026.

This content was written through News Epoch's proprietary AI algorithm that tracks and analyzes public data from major domestic securities firm research centers in real time. We clarify that this is an objective summary based on collected data, and is not an investment solicitation or recommendation for any specific stock.