Goldman Sachs Holds Firm on Kospi Target Amid Earnings Cycle Optimism

Goldman Sachs is maintaining its target for the Kospi index of 12,000, citing that the market is undervaluing the current earnings cycle. According to Tim Mo, Goldman Sachs' chief Asia-Pacific equity strategist, the bank's position is based on their judgment that earnings will provide support and the market is underestimating the duration of this earnings cycle.

The memory chip supply shortage driven by data center competition is expected to deepen further next year, with US big tech capital expenditure revised up from $800 billion to $1.2 trillion. This will drive computing demand that requires a large amount of memory, benefiting the memory chip sector.

Mo projected earnings growth for Kospi-listed companies at around 360 percent this year, but expects it to slow down to 35 percent next year. The current earnings multiple is roughly half its seven-year average, suggesting that Korean companies could meet their earnings forecasts and make the 12,000 target 'not unreasonable'.