Goldman Sachs Cuts KOSPI Target to 9,000, Still Sees Over 60% Upside

Goldman Sachs has lowered its 12-month target for South Korea's KOSPI index to 9,000 from 12,000, but the revised forecast still implies a potential upside of more than 60% from its current levels. The bank's analysts argue that the Korean equity market is trading at a deep discount and offers an attractive risk-reward profile for investors.

Target Cut Reflects Sentiment, Not Fundamentals

According to a note from analyst Timothy Moe, the target reduction incorporates "more conservative assumptions" about near-term market sentiment rather than a change in the firm's fundamental view. "The Korean equity market appears deeply undervalued and offers over 60% upside from current levels," Moe stated, emphasizing that the underlying investment case remains strong.

The KOSPI has fallen 40% from its peak in June 2026, a sharp correction that has occurred alongside record corporate profits. This has pushed the market's 12-month forward price-to-earnings (P/E) ratio down to just 4x, a valuation Goldman Sachs describes as three standard deviations below its historical average.

Valuation Collapse Driven by Volatility

Goldman's analysis attributes half of the market's 40% decline to a "volatility-driven de-rating" rather than a deterioration in corporate earnings. A recent spike in volatility increased the market's equity risk premium, leading to a significant contraction in valuation multiples. The firm suggests that a normalization of risk sentiment alone could help the index recover a substantial portion of its recent losses.

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The sell-off has been particularly pronounced in the semiconductor memory sector. According to Goldman, current price-to-book valuations imply that the market is pricing in a 65% decline in the sector's 2027 earnings, a scenario the bank deems "overly negative."

Contagion and Future Outlook

The negative sentiment has spread beyond technology stocks. Non-memory sectors, which constitute about half of the KOSPI's weight, now trade at a forward P/E of 7.6x, or 2.1 standard deviations below their historical mean. Goldman calculates this implies the cohort is more than 30% undervalued relative to its return on equity.

Even at the new target of 9,000, Goldman notes the KOSPI would trade at a 6.5x forward P/E, which it would still consider more than 20% undervalued. As a near-term headwind, the bank acknowledges that the pace of upward earnings revisions has slowed, which could keep valuations suppressed. Reflecting the adjustment for Korea, Goldman also lowered its target for the MSCI Asia Pacific ex-Japan (MXAPJ) index to 1,040 from 1,120.