Goldman Sachs Reaffirms Bullish Stance on South Korea's Equities

Goldman Sachs has reaffirmed its bullish stance on South Korean equities, maintaining a KOSPI target of 12,000 points. According to Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs, the market is underestimating the duration of the earnings cycle in the memory chipmaking industry.

The earnings growth in this sector is expected to continue, driven by growing demand for memory chips due to increasing investment in artificial intelligence data centers. This shortage will intensify further next year as U.S. big tech companies are forecasted to spend $1.2 trillion on capital expenditures, up from an earlier estimate of $800 billion.

Moe emphasized that hyperscalers have to keep spending even if they don't make a profit, which is good for memory demand. Goldman Sachs estimates earnings growth at KOSPI-listed companies will be 360% this year and slow down to 35% next year.

The low valuations of South Korean equities also support further gains. The current price-to-earnings ratio is about 5.3 times, roughly half the average over the past seven years. Moe believes that if Korean companies deliver the earnings Goldman Sachs forecasts, a KOSPI target of 12,000 points will not look unreasonable.