Global investment bank Goldman Sachs has reduced its 12-month target for the KOSPI index from 12,000 to 9,000, a 25% decrease. However, the firm noted that recent market declines have led to excessive drops in stock prices, suggesting that there is potential for more than a 60% increase from current levels.
On October 25, Bloomberg reported that Goldman Sachs adjusted its KOSPI target in a recent report. The KOSPI has fallen over 35% from its peak in June, prompting the firm to apply a more conservative valuation approach.
Despite lowering its target, Goldman Sachs maintains that the South Korean stock market remains attractive for investors. The firm believes that the market is reflecting overly pessimistic forecasts compared to the fundamental strength of companies.
The recent decline in the KOSPI is attributed to concerns over the profitability of investments in the artificial intelligence (AI) sector. Increased costs associated with expanding AI infrastructure and uncertainties regarding profitability have led to a sell-off, particularly among semiconductor stocks such as Samsung Electronics and SK Hynix.
As a result, valuations in the South Korean stock market have significantly decreased. The price-to-earnings ratio (PER) based on expected earnings for the next 12 months has dropped to around four times, a level not seen since 2006 among the 18 major global stock markets tracked by Bloomberg.
Goldman Sachs noted that the current stock prices in the semiconductor sector reflect expectations of a 65% decline in profits by 2027. The forward PER for stocks excluding memory semiconductors remains at 7.6 times.
The firm retains a positive outlook on sectors related to power, industrial goods, and corporate governance improvements. Companies expected to benefit from a recovery in domestic consumption and the spread of Korean pop culture are also identified as promising investment opportunities.
* This article has been translated by AI.
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