Goldman Sachs Keeps Bullish Stance on South Korea Amid Kospi Correction

Goldman Sachs has reaffirmed its positive outlook on South Korea's stock market despite the recent sharp decline of the Kospi. The bank maintained a target price of 12,000 for the index and characterized the drop as a correction within a longer-term bull market.

The Kospi closed at 6,296.38 on Thursday, down 4.58% from the previous session. Goldman Sachs strategist Timothy Mo kept an 'overweight' rating on the South Korean market and held his target at 12,000 points, which represents roughly a 90% upside from the current price.

The bank attributed the decline to technical factors such as selling by leveraged ETFs, short-term momentum trading, and overbought signals. However, it also cited concerns over the sustainability of the memory chip cycle as a key driver of the pullback.

Goldman Sachs maintained its optimistic view on the memory sector, saying the current cycle is likely to prove stronger and longer-lasting than previous ones due to supply shortages expected to persist through 2030. The bank also pointed to projected earnings growth in non-memory sectors, low valuation burdens, and continued improvements in corporate governance as reasons for its positive outlook.

The report concluded that reaching the 12,000 target would require only a modest re-rating of the current price-to-earnings ratio from around 5.1 times to 7.8 times, which is still below valuations seen at previous market peaks.