Goldman Sachs Maintains Bullish KOSPI Target Amid Historic Selloff
TREE NEWS reports: South Korea’s KOSPI index has suffered its worst seven-day losing streak in years, plunging as much as 20% intraday and triggering circuit breakers. Yet Goldman Sachs’ Asia equity sales desk argues the rout stems from a structural absence of buyers rather than a collapse in fundamental demand. The bank maintains its 12-month KOSPI target of 12,000, implying roughly 110% upside from the current 5,700 level.
The selloff ranks among the most severe in two decades, comparable only to the March 2020 COVID shock (-20.5%) and the August 2011 U.S. credit rating downgrade (-15.1%). Foreign investors have been net sellers for eight consecutive sessions, offloading $13.4 billion from KOSPI, with $11.6 billion—86% of the total—concentrated in technology stocks, primarily Samsung Electronics and SK Hynix.
Anatomy of the Selloff: Buyback Exit Meets Foreign Exodus
The immediate trigger was the withdrawal of corporate buyback support. Samsung Electronics completed its share repurchase program on October 6, and SK Hynix is winding down its own tail-end buying. Their exit removed a critical price floor just as foreign selling intensified.
With domestic buyers absent, foreign outflows breached multiple psychological thresholds, sparking forced liquidations. Notably, 80% to 87% of foreign selling was concentrated in just two memory heavyweights—Samsung and SK Hynix—suggesting the pressure was liquidity-driven rather than a broad repricing of Korean market demand.
Valuation and Earnings: The Bull Case
Goldman’s mid-term bullish thesis rests on two pillars: extremely low valuations and a rapidly recovering earnings path.
- Valuation: The KOSPI trades at a forward P/E of 5.1x—2.7 standard deviations below its historical mean. Its price-to-book ratio of 1.8x corresponds to a 26% 24-month forward ROE, suggesting the market is not fully pricing in the earnings recovery.
- Earnings: Goldman’s Asia equity strategy team forecasts earnings growth of 320%, 35%, and 20% for 2026, 2027, and 2028, respectively. The core driver is AI hardware demand, with Samsung and SK Hynix as primary beneficiaries of sustained data center capex.
The Korean won also plays a role. Goldman’s emerging markets strategy team notes that Samsung and SK Hynix must convert 70% to 80% of their trade surplus into won to cover taxes, capex, shareholder returns, and wages—creating persistent downward pressure on USD/KRW. Bank of Korea Governor Shin has said further won appreciation would boost household purchasing power and reiterated a restrictive policy stance until inflation converges to target.
Three Risks to Monitor
Goldman’s Tim Moe identifies three trackable risks that, if materially worsened, would force a reassessment of the 12,000 target:
- Memory cycle durability: The bull case hinges on AI-driven demand for HBM and DRAM. Any peak signal would directly pressure earnings forecasts.
- Retail leverage and leveraged ETFs: If orderly deleveraging turns into a stampede, it would add fresh selling pressure beyond foreign outflows.
- Chinese open-source AI competition: If Chinese models capture market share and curb hyperscaler capex, memory shipment expectations would weaken, undermining the entire earnings path.
Two near-term catalysts bear watching: SK Hynix’s Q3 earnings on October 27, which will reveal actual memory demand strength, and Samsung’s 40 trillion won dividend payment from November 18-20, which could provide temporary won support and a window to gauge whether foreign selling is abating.
Key Takeaways for Investors
- The KOSPI’s sharp decline appears driven by a temporary buyer vacuum—buyback exits and concentrated foreign selling—rather than deteriorating fundamentals.
- Extremely depressed valuations (5.1x forward P/E) and a robust AI-driven earnings recovery path support a contrarian bullish stance.
- Risks are concentrated in memory cycle durability, retail leverage, and Chinese AI competition; any deterioration warrants a reassessment.
- Upcoming SK Hynix earnings and Samsung’s dividend payout are key near-term checkpoints for sentiment and currency flows.
