Citi Sees Over 50% Upside for KOSPI, Citing Record-Low Valuation

Citigroup is affirming a bullish outlook on South Korean equities, arguing that a recent selloff has created a significant buying opportunity. In a research note, the bank maintained its KOSPI target at 10,000, a level that suggests more than 53% upside from the index's recent closing price.

Valuation at Crisis Levels

Citi's positive thesis is anchored in the index's historically attractive valuation. Analysts highlighted that the KOSPI's current 12-month forward price-to-earnings (P/E) ratio of 5.8x is lower than levels seen during the 2008 Global Financial Crisis (6.4x) and the 2020 COVID-19 pandemic (8.5x).

The bank's 10,000 target is based on 2.3 times book value per share, which implies a 9x P/E multiple, slightly below the 20-year average. Citi forecasts that net profit for the index will surge 248% year-over-year in 2026, with earnings growth expected to broaden into sectors like AI, robotics, and manufacturing by 2027.

Shifting Capital Flows

According to Citi, the recent market correction was primarily driven by foreign investors rebalancing portfolios and taking profits, but this selling pressure is now moderating. The bank pointed to several factors suggesting a more stable market environment:

Ad

• Accelerating inflows into overseas KOSPI-related passive ETFs since early July.
• New regulations on single-stock leveraged ETFs, which are expected to limit retail-driven volatility.
• An expectation that Korea’s National Pension Service will "remain overweight domestic equities for longer."

Strong Macro and Sector Fundamentals

Citi's optimism is further supported by a stable macroeconomic outlook and a robust semiconductor sector, a key driver of the KOSPI. The bank's GDP growth forecasts for South Korea remain unchanged at 3.7% for 2026 and 3.0% for 2027, citing strong semiconductor exports.

Despite recent market concerns, Citi sees "no change to memory demand" and expects average selling price momentum to remain strong in the second half of 2026. Analysts characterized the recent pullback in Korean memory stocks as "more of a technical correction driven by market-wide profit-taking."