Goldman Sachs Sees 90% Upside on Korean Stocks, Targets 12,000 Kospi Index

Goldman Sachs has raised its target for the Kospi index to 12,000, implying a 90% upside in the Korean market. This prediction comes as the market is absorbing the impact of a violent unwind of leveraged retail products. The firm's Chief Asia-Pacific Equity Strategist, Tim Moe, stated that their conviction level in the stronger-for-longer cycle is 'really strong' and 'very high.'

The call was made amid significant volatility, with Korea's 10-day volatility reaching near 100% last week. This has led to a collapse of leveraged ETF assets under management from $53 billion to around $14 billion, before recovering slightly to $24 billion.

Moe's argument for the target is based on valuation and earnings growth tied to the AI capex cycle. He notes that the market is trading at 5.1 times current consensus 12-month earnings, which are expected to grow by 32% this year and 35% next year.

The fund manager emphasized the importance of semiconductors in the Korean market, with over 50% of the Kospi index comprised of companies in this sector. He also highlighted defense as a key pillar, noting that earnings growth is crucial for the market to reach its target.