Goldman Sachs Drastically Raises KOSPI Target to 12,000 Points... "Betting on Prolonged Memory Super Cycle"

Global investment bank (IB) Goldman Sachs has drastically raised its 12-month target for South Korea's KOSPI index from the previous 9,000 to 12,000 points, presenting a strongly optimistic view on the Korean stock market. This implies an additional upside potential of approximately 36-37% from current price levels, and the firm also maintained its 'Overweight' rating on the Korean equity market.

The key driver behind this target upgrade is the 'memory semiconductor super cycle' combined with the artificial intelligence (AI) boom. Goldman Sachs analyzed that as compute demand exceeds memory supply, semiconductor companies have gained strong pricing power, and their profit generation capacity is being maximized due to high operating leverage effects. While some in the market are skeptical about how long the current high returns of KOSPI semiconductor stocks will last, Goldman Sachs expressed confidence that this semiconductor cycle will last longer than ever before.

The explosive earnings growth of companies is also driving the index upward. Goldman Sachs revised upward its earnings per share (EPS) growth forecasts for the Korean market for 2026 and 2027 to 320% and 35%, respectively. It is particularly encouraging that this rally is not limited to the semiconductor sector. Even excluding Samsung Electronics and SK Hynix, which account for a high proportion of market capitalization, the 2026 earnings growth forecast for the remaining KOSPI companies has sharply increased from 20% in January this year to the current 57%, expanding investment opportunities to non-semiconductor sectors as well.

The attractive valuation of the KOSPI and a positive policy environment were also cited as major grounds for the target upgrade. Goldman Sachs evaluated that the KOSPI is currently attractive as it is trading at a conservatively estimated 12-month forward price-to-earnings (P/E) ratio of 8 times. Furthermore, with over 60% of KOSPI constituent stocks still remaining below a price-to-book (P/B) ratio of 1 time, it predicted that corporate governance improvement policies such as the 'Value-up Program,' which will get into full swing in the second half of the year, will act as catalysts driving the valuation re-rating of low P/B companies.

However, there are also potential risk factors stemming from the surge in stock prices. It pointed out that the severe concentration where just two stocks, Samsung Electronics and SK Hynix, account for over 50% of the total KOSPI market capitalization, along with an increase in speculative trading by retail investors, could make the market vulnerable to short-term corrections. In addition, macroeconomic vulnerabilities such as sluggish domestic demand and the erosion of export market share by China are mentioned as warning signs.

Nevertheless, Goldman Sachs analyzed that even when applying the worst-case scenarios of past profit declines and economic recessions, the theoretical downside support level of the KOSPI is solid at around the 7,820-point mark. Because the firm earnings growth of companies is supporting stock prices, it advised that even if a short-term correction occurs, it should rather be used as an active opportunity to 'overweight (buy).'