According to Bloomberg, Goldman Sachs has cut its 12-month target for South Korea's Kospi index by 25% to 9,000 from 12,000, as investor concerns over artificial intelligence spending and semiconductor valuations deepen. The revision follows a decline of more than 35% in the benchmark from its June peak, with the Kospi closing at 5,550.30 on October 23 according to Google Finance. As per Bloomberg, Goldman's strategists, including Timothy Moe, said the new target reflects more conservative assumptions about how investors may value corporate fundamentals, even as the target implies potential upside of more than 60% from current levels. The bank had raised its Kospi target in June and retained the 12,000 forecast despite the market's subsequent decline, but the latest cut signals a reassessment of valuations rather than an outright retreat from the Korean market.
According to CNBC TV18, Goldman Sachs has upgraded equities to overweight for the next three months, citing cheaper valuations, reduced investor positioning and expectations of strong earnings as key drivers. The investment bank's analysis suggests that the recent market correction has created a more favorable entry point for equity investors, with equity multiples across Asia and global markets falling by close to 20% year to date even as earnings continued to grow. As per CNBC, the upgrade represents a tactical call rather than a prediction of immediate market rebound, with the bank believing the combination of lower valuations and resilient earnings has improved the potential returns relative to risks facing equity investors. The latest developments show that South Korean equities have moved from among the year's strongest-performing markets to some of the cheapest globally, with the Kospi's 12-month forward price-to-earnings ratio falling to around four times, a level last seen in 2006.
According to Goldman Sachs analysis reported by CNBC TV18, investor sentiment has worsened in recent weeks following a sharp drawdown in artificial intelligence plays, including semiconductor makers and stocks in South Korea. However, the recent weakness in AI-linked stocks reflects concerns about funding and investor positioning, rather than a clear deterioration in underlying demand for computing capacity. As per CNBC, investors are questioning whether the more leveraged parts of the AI ecosystem can finance the capital expenditure required to sustain infrastructure build-out, while substantial positions had accumulated in semiconductor stocks, leaving them vulnerable to selling as sentiment weakened. Despite near-term pressure, Goldman Sachs expects strong earnings to support AI-linked markets over a longer period, with the bank maintaining that markets could be higher over the next 12 months if underlying earnings growth remains strong. The bank's latest analysis suggests that current semiconductor valuations imply a 65% decline in the sector's 2027 earnings, which Goldman considers excessively pessimistic.
Memory chipmakers make up about half the index, with their shares continuing to fall through record profit guidance. Samsung guided a third-quarter operating profit of about 107.4 trillion won on October 8, about 20% above the second quarter. However, Samsung shares fell 2.42% that day to 262,000 won and have since dropped about 18%, closing at 215,500 won on October 23. SK Hynix closed at 1.277 million won, about 57% below its 52-week high. According to Fidelity's Jurrien Timmer, the KOSPI is barely holding a potential head-and-shoulders neckline, with a break below that line near 5,451, about 2% below the October 23 close often read as a sign of further losses. Retail investors are already underwater, with their net purchases this year carrying an estimated average entry level near 6,550, leaving the typical retail position about 15% down before counting leveraged bets.
SK Hynix holds its third-quarter call on October 28, while Samsung reports full results with division figures on October 29, offering the first test of Goldman Sachs' view that the market's 65% assumption for semiconductor earnings decline is excessively pessimistic. Management comments on 2027 pricing and orders may matter more than third-quarter profits, as that outlook will help show whether the market's pessimistic view is justified. The upcoming earnings reports come at a critical time when the KOSPI's 2026 gain has shrunk to 28.79% from about 116% at the June peak. Despite lowering its headline Korea target, Goldman continues to favour selected Korean stocks in power, industrials, corporate governance-related plays and businesses positioned to benefit from domestic reflation and the global popularity of Korean culture. The bank emphasizes that investors should maintain balanced portfolios with diversification across regions and investment factors rather than relying heavily on single market themes.
